Even in the best of times, taking care of a baby is no mean feat—more so for first-time parents. One anxiety many parents have with their first child is how to support them, and this task is made even more challenging today by the economic challenges caused by COVID-19. In fact, a report by the Vanier Institute of the Family revealed that the majority of Canadian families see the pandemic as a threat to their financial security.
Fortunately, you don’t have to navigate these murky waters alone. Here are some handy tips to ensure your child’s financial future in Canada today.
The Pre-baby Budget
A great way to begin financial preparations for your child is to spend less time worrying about cribs and strollers. Instead, spend more time thinking about your allowance while on parental leave. Base your budget around it and live on that budget before the baby comes.
It’s also a good idea to get your finances in order while you’re on leave. One of our guides here on FCIQ gives you tips on how to control your debt (if you have any). Start preparing your budget and planning for major expenses. This way, you won’t get sticker shock—a phenomenon where you feel ambushed by the actual cost of raising a baby.
If you still feel the urge to browse through baby items, though, consider getting them second-hand from relatives or from online sellers. Chances are, you can furnish your dream nursery at a fraction of the cost!
Considering Childcare Expenses
If both you and your partner are planning to return to work after parental leave, you may want to think about childcare and how that would fit into your budget. Take note, however, that the cost of childcare tends to be more expensive in cities. This article by Today’s Parent offers a quick run-down of childcare costs in most of Canada’s major cities, with Vancouver topping the list at a staggering $1,407 per month.
“Insuring” a Happy Childhood
In ensuring you’re providing your kid with a good childhood, you can never be too careful. That’s why we recommend insuring your child early or adjusting your existing coverage if applicable, especially if you’re a single parent. Many insurance plans offer features that help pay for your child’s education, invest in stocks in their name, and pay for emergencies. In any case, you can be confident that your child will be prepared for anything life will throw their way.
The Road to University
Given that the annual cost of post-secondary education in Canada is pegged at around $19,500, it’s safe to say that it’s never too early to start your child’s college fund. In fact, some financial experts recommend prioritizing this over your own retirement plan.
Saving up for your child’s education need not be limited to the change-in-a-jar method, however. Instead, many parents rely on Registered Education Savings Plans, or RESPs, as a safe and risk-free way to build up the funds their children need. You can invest money in the plan as soon as your child is born, and then it will accumulate tax-free until your child is ready to use it.
Up to $50,000 can be amassed within the RESP over time, and thanks to the Canada Education Savings Grant (CESG), the government even pitches in by providing a 20% top-up grant at a maximum of $500 per child annually. All you need to do before finding an RESP provider is to register your child for a social insurance number (SIN), and you’re good to go!
Don’t Forget About Yourself
Eventually, your confidence in both parenting and finance will grow, but make sure to remember yourself in the process. Treat yourself once in a while, and look into getting a Registered Retirement Savings Plan, which can also help you buy your own home along the way. This way, you and your family can look forward to a bright future ahead.