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December 2021 – 15 min read

Perhaps you’re thinking about starting a family, or maybe your new addition is already on the way. Either way, if your family is growing, now is as good a time as any to look at your financial plans.

How much do you currently owe, and for what? Are there ways you can lower your outstanding debts before baby arrives? If you’re not able to pay down any high-interest loans or credit cards, you might want to look at combining your debt and/or choosing a lower interest option to help clear the balance. Reducing what you owe now to enjoy more cash-flow later can be a big help, especially during months of parental leave.

There are many things that will change when your new baby arrives – including your spending habits. Even if parenthood is still a few months off, now is a good time look at how you spend your disposable income to see if there’s any way you can cut back. Tracking what you’re spending now can give you an idea of how you’ll manage later when/if you’re off work.

Now is a great time to look at your current investments and savings. Doing this can help you see what can potentially be used in the short-term to cover things like income loss and additional expenses, perhaps from your TFSA, and what can be used to help provide financial security for your family’s future.

If after adding up your current income, debt, and savings you feel that you could use a little boost, why not consider bringing in some additional income if possible? For example, you might want to do a little extra work outside of your current job or look at other ways to generate some additional income, such as property, or even selling things as part of a clear out to make room for baby.

You may want to finance larger purchases or need some help covering bills while you’re off work. If borrowing money is part of your baby budget, you can use free tools like Equifax and TransUnion to get a free credit check without impacting your current score. Your score will give you an idea of whether a loan is likely to be approved, and therefore whether you can expect to consider any loans as part of your plans.

Once you have an idea of your current financial situation, you can start to factor in the costs that come with welcoming a new baby.

According to the CPAOpens a new website in a new window, having a child in Canada will cost you between $10,000 and $15,000 a year until they turn 18. Some of these expenses occur at a time when you’re off work and not earning as much, and so thinking ahead is key to make sure you’re prepared. Before you start thinking about budgeting for the future, there are steps you can take to review your financial situation now.

There are a few important things to start thinking about and to budget for as you wait for your new arrival.

Plan for time off

Look into your options for maternity and parental leave. Employment Insurance (EI) benefits are available to people who have recently become parents, so make sure to look into these to cover your time off work. Some employers will top up parental leave benefits, so speak to your HR department once you know you’re expecting to see what your options are.

At this time, you can also look at what you’ll be able to receive from the government once your baby arrives. The Canada Child Benefit (CCB) is a tax-free payment available to eligible families, and you can apply for it as soon as your baby is born.

Budget for big-ticket items

There are some must-have items that you’ll need to invest in to prepare your car and home for your new arrival.

Furniture such as a crib, changing table, and dresser are some of the larger items you’ll need to buy, and a car seat is essential. Other items like strollers and bassinets should also be on the list, as well as tech items such as baby monitors. It’s a good idea to do your research when shopping for these larger purchases to compare prices and then decide how you plan to buy these – you may want to pay outright, purchase on finance, or even ask for these as gifts through a registry.

Looking at the longer term

With all the excitement of decorating new nurseries and planning baby showers, make sure to carve out some time to look at some important long-term financial decisions, too.

First, if you have life insuranceOpens a new website in a new window, you may want to look into the process of adjusting your beneficiaries. You may even want to look into whether you want to buy life insurance for your child. At this time, many parents will also look at opening an RESPOpens a new website in a new window to start saving for their child’s post-secondary education.

With the anticipation of a new baby, it can be easy to put yourself last or put aside saving for your own future. However, it’s important to continue contributing to your RRSPOpens a new website in a new window, even if that monthly payment is scaled back somewhat. Especially while you’re off work and earning less, it may make sense to contribute less to your RRSP now and resume your regular saving once you’re back to work.

Start a rainy-day fund

Of course, even with the best laid plans, you may need to tap into an emergency budget here and there. If unexpected costs crop up, it’s good to have an everyday savings account handy so that you can cover them without having to dip into your investments and impact your long-term financial goals.

Consider your childcare options

It may seem a long way off, but how you plan to care for your childOpens in a new window before they’re school-age will have a big impact on your finances over the few years. If you don’t plan on returning to work, make sure to plan for how this will impact your household income. If you do plan on going back to work, look at the costs of options like daycare and Montessori. Depending on where you live, you might also want to look into waiting lists to make sure there’s a spot available for when the time comes.

There are some ways you can help stretch your budget, such as:

In the early days (and nights), budget is largely spent on cleaning and feeding. If you choose disposable diapers, you’ll need plenty of them along with wipes and other supplies. If you choose cloth diapering, make sure to factor in the costs of cleaning them. If you’re breastfeeding, you might invest in some nursing aids like pumps or pillows. If your baby is formula fed, make sure to account for this in the budget, noting that ready-to-drink formula costing slightly more than powder.

Your baby will start to want to grip toys and lift their head, which means you might want to invest in play mats and toys that can encourage these milestones. As baby outgrows their newborn outfits, you’ll need some bigger clothing – and of course, bigger diapers! It’s also around this time that you’ll start to experiment with pureed foods, which is available store-bought or can be made yourself.

When your little one starts to crawl, it’s a good idea to make sure your home is baby-proofed. You may want to budget for safety gates, plug sockets, locks and other expenses depending on the size and layout of your home. You may also want to leave some extra room in the grocery budget as your baby moves from pureed to solid foods.

It’s a time for celebration as your child nears their first birthday – but for many parents, this also signals the end of maternity or parental leave. If you both plan to return to work, the costs of childcare or nursery will start to kick in. At this stage, you may also want some more toys or aids to encourage walking, but these can also appear in the form of gifts at that all-important first birthday party.

Taking little steps to stay on top of your finances, such as creating checklists or plans, can help you feel more in control.

Create a checklist for one-time expenses  

These can be the essentials that you’ll need to get set up and can also form a gift registry list.

Create a monthly budget  

This can include ongoing expenses for things like babysitting, food and clothing, and other regular costs that you’ll need to factor in.

Set aside for the unexpected  

Having even a small emergency fund can put your mind at ease and help cover any costs you weren’t anticipating.

The costs of having a baby might seem overwhelming, but the right planning and research can help you prepare for this exciting time.

The information provided is based on current laws, regulations and other rules applicable to Canadian residents. It is accurate to the best of our knowledge as of the date of publication. Rules and their interpretation may change, affecting the accuracy of the information. The information provided is general in nature, and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors.

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