How to financially plan for a baby in Canada

Planning to have a baby or adopt a child is one of life’s greatest adventures. Nothing compares to all the “firsts” you experience – the joys and the challenges. Nothing truly prepares you for those ups and downs, either.

What you can prepare for, however, is the cost of having a baby. It’s difficult to calculate the exact dollar figure of raising a child from birth to high-school graduation (expenses vary from family to family), but past studies estimate that it’s near or above $200,000 per child. In today’s dollars, that number is likely higher, which means you can expect the average cost of a child per year in Canada to be somewhere between $10,000 and $15,000.

While these expenses can seem daunting, the right planning can help to ease the burden. Several benefits and tools are also available to support new parents with the financial pressures of having a baby in Canada.

Take advantage of government benefits

A number of government benefits are available to help you manage costs, including the Canada Child Benefit (CCB), which provides a tax-free, annual payment until your child turns 18. The CCB is not a refund for expenses. Rather, you can use the funds however you see fit. The amount you receive is based on your family’s net income and the age of your child. Try this calculator to estimate your CCB.

Consider these ways to save for your child’s future

After budgeting for the clothing, food, daycare, after-school programs and recreational activities that your child will need, it can be difficult to find extra funds to invest in their future. But even small, regular contributions to a savings or investment plan can go a long way. And you can begin as soon as your child is born to maximize your allowable contributions. Options include:

Registered Education Savings Plan (RESP):
Designed to help you and your child cover the costs of post-secondary education, this account allows your contributions to grow tax-free, and comes with powerful government grants that kick in additional funds. Through your RESP, government programs are available to help grow your child’s education plan. These include the Canada Education Savings Grant (CESG) and the Canada Learning Bond (CLB).

Tax Free Savings Account (TFSA):
Supplement savings for your child’s future by maximizing your TFSA contribution room. Investment returns – including capital gains and dividends – are not taxed, even when withdrawn. You can use the funds at any time, for any reason (like sports equipment, braces, or a school trip). And, once your child reaches 18, encourage them to open a TFSA of their own.

Life insurance:
Newborn life insurance costs are the lowest you’ll pay for this type of comprehensive coverage. That’s why many parents buy life insurance for their babies, which comes with a cash-value component that allows for tax-advantaged accumulation. These savings can be accessed when the child is older to help pay for post-secondary education or other expenses.

Critical Illness insurance:
When you purchase a critical illness insurance policy for kids, their coverage doesn’t expire until the policy-anniversary date nearest to their turning 75. Not only will they be protected while they’re young, but their coverage will last for years to come.

Start early and plan together

As a new parent, you have endless hopes and dreams for your child. Starting to save early will help your money grow even more, helping you realize that future.

While you’re at it, consider involving your kids in your family budgeting and financial planning, once they reach an appropriate age. This will help them understand how much it costs for significant life purchases, like enrolling in a post-secondary program (and living day-to-day if they leave home). It will also teach them the value of saving, working hard and making the right choices to achieve their own financial success.

Have questions about saving for your children’s future? A Co-operators financial representative can help.

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