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Budgeting for a Baby

There are few things in life as special as welcoming a new baby. Whether you’re becoming a parent for the first time or adding another child to your family, it’s a wonderful and joyous occasion.

Still, while you may be over the moon with your little bundle of joy, it’s worth remembering how big a bundle that new child is likely to cost. Some financial experts estimate the price tag at more than $15,000 per year in the first two years of life for a child with no siblings.

If you’ve recently gone through the life-changing experience of becoming a parent, or you’re about to, here are some of things you’ll want to think about when budgeting for your baby.

Do research before stocking up

For first-time parents, welcoming a child often means a shopping spree for all manner of baby-related items, from strollers, cribs, car seats, and clothes to diapers, toys, rusks, and rocking chairs.

Most items aren’t too expensive on their own, but costs can definitely add up. If you’re trying to save money, you may be able to get some things second-hand or through gifts and donations from friends and family. Before you buy, talk to other parents about what they used and what they didn’t find useful. Neighbourhood-based Facebook groups or forums are a great resource for research and second-hand goods.

To avoid big up-front bills, some new parents choose to finance larger costs such as strollers or furnishings for home nurseries. Be mindful of costly interest charges on any such purchases.

Be aware of potential income loss during parental leave

Taking leave from work to spend more time with your child in their early days is rewarding and memorable, full of precious ‘firsts’ and meaningful bonding experiences. Unfortunately, parental leave often means a short-term pay cut, sometimes close to 50 per cent. Needless to say, all that lost income can have serious financial implications for some.

Certain employers will top up some or all of the shortfall between an employee’s regular wage and the amount earned during leave. Make sure you know what the situation is at your workplace before booking leave, and consider splitting leave time with your partner if their situation is more financially favourable.

It’s never too early to think about an education fund

No parent wants to accelerate the journey from infant to post-secondary student too much. Still, even if your child is still in diapers, it’s not too early to start saving for them to someday wear a graduation cap and gown.

The more time you have for savings to grow, the more money you’re likely to accumulate by the time your son or daughter progresses to post-secondary education. Open a Registered Education Savings Plan for your child and take advantage of a federal grant that provides up to $7,200 in top-ups to your own annual contributions. Encourage loved ones to contribute to the infant’s RESP instead of buying gifts for birthdays and holidays.

Sort out life insurance and a will

Becoming a parent is a timely reminder of the importance of life insurance, so consider purchasing a policy if you don’t already have one. The arrival of a new child is also a good time to ensure you and your partner have a legal will. Now that a little person is depending on you, make sure they’re designated as a beneficiary and you’ve appointed a guardian should anything happen. Adjust your budget and put a few extra dollars aside to pay for insurance, or any fees associated with preparing your will.

Apply for the Canada Child Benefit

Depending on how much you earn and how many children you have, you may be eligible to receive a tax-free monthly payment via the federal Canada Child Benefit. If you’re eligible, the amount of your benefit payment is assessed every year based on your family’s latest income tax information. Eligible parents receive more benefit money when their children are younger, and a smaller amount for school-aged kids.

Have a plan to cover childcare costs

No parental expense is likely to be larger than childcare. Once you and your partner both go back to work, you’ll need to be able to afford the cost of having someone look after your child, whether it’s at a licensed day care facility, a home-based option, or through private care.

Fees tend to be steepest when kids are young and the ratio of caregivers to children is highest. Competition for spots is often also high, so it’s wise to start looking for options as soon as your baby is born, if not before. Ontario just announced a plan to offer more affordable childcare options, so be sure to choose a licensed childcare provider that qualifies for the government rebate. Assess your savings situation, and your spending, and start putting money aside for this cost as soon as you can.

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