Planning for a baby and being financially prepared

Planning a family and having children is one of life’s greatest adventures. Nothing compares to all the “firsts” you experience, the joys and challenges – and the inevitable ups and downs. Nothing truly prepares you for it, either.

What you can prepare for is the cost. While it’s difficult to calculate the exact dollar figure of raising a child from birth to high-school graduation – specific expenses vary from family to family – past studies and calculators estimate a cost near or above $200,000 per child. In today’s dollars, the number is likely closer to $250,000, which means you can expect to spend somewhere between $10,000 and $15,000 per child, per year.

While these figures may seem daunting, a number of government benefits are available to help, including the Canada Child Benefit, which provides a tax-free, annual benefit of:

  • up to $6,496 per child under age 6
  • up to $5,481 per child from age 6 to 17

Try this calculator to see what your Canada Child Benefit may be.

Saving for post-secondary education

In 2017/18, the average cost of tuition for an undergraduate program for full-time Canadian students was $6,571, up 3.1% from the previous academic year. That doesn’t include housing, insurance, books, food and other necessities of student life.

Thankfully for parents, there are effective ways to save and plan for post-secondary education – and you can begin as soon as your child is born to maximize your allowable contributions.

  • Registered Education Savings Plan (RESP): There are a few reasons an RESP is often a parent’s first choice to save for their children’s education. Any contributions you make will grow tax-free over the life of the plan. In addition, through the Canada Education Savings Grant (CESG), the government will match an extra 20% of your contributions to a maximum of $500 per child per year. Depending on your income, you may be eligible for an additional amount of CESG.
  • Tax Free Savings Account (TFSA): A TFSA allows you to save up to $5,500 tax-free per year. Investment returns earned in a TFSA – including capital gains and dividends – are not taxed, even when withdrawn. It’s a great way to supplement savings for your child, if you’re able to do so.
  • Life insurance: As a parent, the main benefit and need for life insurance is to protect your family’s financial future if you pass away. It provides financial support and allows your family to pay off large expenses like your mortgage, and stay on track to pay for your children’s post-secondary education. Another way to use life insurance is for supplemental savings. Many parents or grandparents purchase permanent life insurance policies for their children, so when they’re older, the policy’s cash value can be withdrawn and used for their education.
  • Government of Canada services: Additional programs are available to assist with saving for post-secondary education, including the Canada Education Savings Grant, the Canada Learning Bond and more.

As a new parent, you have many hopes and dreams for your child. Starting early will help you save more for your child’s education. For more information on how you can protect your family, talk to your Financial Advisor.