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Preparing your finances for the cost of raising a child

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Starting a family means committing to a new lifestyle – and raising children can be costly. A 2011 MoneySense magazine report based on Canadian government statistics estimated the average annual cost of raising one child to be $12,824 – or more than $1,000 a month. Footnote 1 These numbers were then updated in 2015 to account for inflation, with the monthly cost rising to almost $1,200. Footnote 2

This includes all expenses, such as bigger cars and homes, but not university or college.

The good news is that a little planning can go a long way towards helping you remain in control of your financial future.

Keep track of your money with a spending plan

By creating a spending plan, you can trim your expenses and monitor your debt. This can help you decide whether to spend money on things like restaurant meals, vacations and top-of-the-line electronics. Cutting spending on these items can help you pay for immediate needs, like baby furniture or child car seats.

Get to know your province’s maternal and parental leave rules

Total weeks of maternal and parental leave vary by province and territory, ranging from 15 to 18 weeks for the biological mother and 35 to 52 weeks of sharable parental leave.

Learn more about Employment Insurance (EI) – or in Quebec, the Quebec Parental Insurance Plan (QPIP) – on the Government of Canada websiteOpens a new website in a new window - Opens in a new window .

Start your research on child careOpens in a new window - Opens in a new window

Parents who live in Quebec may enjoy subsidies that limit daycare fees to a maximum of $7.30 a day. For the rest of Canada, daycare can range from $700 to more than $2,000 a month, with costs highest for infant care. The sooner you start your search, the sooner you can get your name on waiting lists for the daycares of your choice.

Learn about your insurance options

Having children is the perfect time to look at how you’re protecting your loved ones. If you’re looking for protection that meets your family’s needs but your funds are limited,  term life insurance might be the route to take. It’s a good choice for a growing family.  

Critical illness and  disability insurance can also be important parts of a financial plan if you’d like to protect your family in the event of an injury or serious illness. Meanwhile, individual health insurance can also help families with dental care and extended health benefits.

Build your child’s education fund with an RESP

With the cost of college and university increasing, registered education savings plans (RESPs) make sense for many parents. Although RESP contributions can’t be deducted from your taxes, they grow tax-free. Plus, qualifying withdrawals are treated as the student’s income, which is typically taxed at a much lower rate.

The federal government also provides incentives that add $1 for every $5 you put into an RESP (up to $500 a year and $7,200 total), with some provinces offering additional incentives. Total RESP contributions are capped at $50,000 per beneficiary. Footnote 3

Ensure your plans are in place with a will

A properly prepared will can help ensure your children’s financial security. Do-it-yourself will kits are an affordable option, but the extra money you would pay for an estate lawyer could lower the risk of your intentions being misunderstood.

Footnote 1
1 Camilla Cornell, “The real cost of raising kids,” MoneySense, Aug. 2011, a new website in a new window - Opens in a new window
Footnote 2
2 Marilisa Racco, “How much does it cost to raise a kid in Canada?” Global News, January 12, 2017, a new website in a new window - Opens in a new window
Footnote 3
3 Melissa Leong, "FP summer school: 22 savvy savings strategies to help you reach your goals," Financial Post, July 12, 2014, a new website in a new window - Opens in a new window

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