The global and economic impact caused by COVID-19 has forced many Canadians to make dramatic changes to the way they spend and save money. The current situation is completely unprecedented, and it can be very difficult for those just beginning to invest in their future. Adjusting to a new normal is hard enough, but coupled with a pandemic, things may seem especially nerve-racking for new families.
Here are four tips that can help you and your young family better manage finances during these uncertain times.
1. Update your budget
Your budget is likely drastically different than it was a few months ago, so it’s a good time to review and update it to not only reflect your growing family, but to also adjust to your current financial situation. If you’re still using a pre-COVID-19 budget, now is the time to cut down on spending by differentiating your purchases between wants and needs. Needs are immediate obligations, like your mortgage, groceries, and car payments. Wants are optional purchases like clothes, takeout food, and electronic upgrades.
2. Minimize expenses
With people spending more time at home and staying safe with physical distancing, now is a great time to become more creative with how you spend and save money. Regular household tasks like cooking and home renovations can turn into fun activities for you and your family, while adding a few extra dollars to your wallet.
Here are a few ways you can start saving:
- Cooking meals at home
- Making your own baby food instead of buying it
- Comparing grocery prices with price-matching apps
- Making your own cleaning supplies
- DIY home renovations
- Making baked goods (bread, cookies, cakes, etc.) rather than purchasing them
- Starting a vegetable garden
- Using a free online workout plan vs. a gym membership
- Unsubscribing from unused memberships and marketing emails to avoid impulse shopping and unnecessary spending
3. Manage debt
Ongoing layoffs and the continued shutdown of non-essential services have resulted in many Canadians accumulating more debt than usual. To save yourself from drowning in unpaid bills and high-interest rates, analyze your expenses and come up with a concrete plan to paying down your debt. Consolidating your debt with a personal loan or line of credit can help you quickly access a large sum of money with a fixed, low-interest repayment option.
If opening a new credit account isn’t in your immediate plans, try identifying your major expenses and start triaging your bills by prioritizing payments that have higher interest rates. You can also try asking for a relief or deferral of payments, as many Canadian banks and auto-insurance companies have implemented new lending and policy changes to help assist clients during the pandemic.
4. Plan for the future
Given the current economic uncertainties, you might find yourself spending less money on non-essential purchases, which could result in savings. This can be an excellent and easy time to build an emergency fund for any unexpected expenses you might encounter. Having an emergency fund can be a great financial safety net, especially if you lose your job or face significant pay cuts.
For new families, you might notice an increase in your child tax benefit. In response to COVID-19, families can now get up to $300 extra per child. If your budget allows, start investing in your child’s future with a RESP (Registered Education Savings Plan). When you open a RESP account for your child, the federal government will automatically contribute a Canada Education Savings Grant of 20% – which is an extra $500 on your maximum contribution of $2,500 per year.
Now more than ever, many Canadians are revaluating their spending habits. As a new family, it’s important to align your financial goals with your current situation by creating a concise monthly budget that has growth in mind. Regularly reviewing your finances can help you find stability and focus on making smart financial decisions during this difficult time.
Contact us today to learn more about how Moya Financial can help your family save!