When my daughter was born, it brought joy to our family. I wish I could say it was an easy journey to have her, but the reality is that we struggled with conception and had to get help. While the cost of in vitro fertilization (IVF) is a whole different story, my wife and I quickly learned that we would need to manage our money differently as new parents.
We knew that having a child would be expensive, and despite our planning, we were still caught off guard at times. Fortunately, we were able to handle every situation that came our way. But, there’s no denying that our budget took a hit, and we were stressed out quite a bit at times. Whether you’re a new parent or you just found out that you’re expecting, here are 5 money tips to help you keep on track.
Redo Your Budget as Soon as Possible
As soon as you find out you’re expecting a little one, you should redo your budget. The first thing to do is calculate how much you’ll be bringing in when one of you will be on parental leave. Although you may qualify for employment insurance benefits, many couples will see a significant decline in their income while off caring for their child.
Now that you’ve estimated how much you’ll be bringing in, you can look at what will be going out. Many of your expenses won’t change, but you’ll now need to budget for things such as diapers, clothes, baby accessories and more. It’s also a good idea to factor in childcare costs as you’ll need to pay for that eventually.
A decrease in your income combined with increased expenses is a recipe for disaster, which is why it’s a good thing you’re making adjustments now. You’ll likely need to cut back on any non-essential expenses such as entertainment and eating out. It’ll be challenging, but it’s a sacrifice you’ll need to make to keep your budget balanced.
Be Creative When It Comes to Saving
Many new parents want the best for their children. It could mean name-brand strollers, the most expensive crib, every toy possible, and more. While this is undoubtedly a noble cause, if you’re going to go this route, you’re going to need to spend a lot of money. You might be better off looking for ways to save.
One easy way to cut back on your costs is to look for baby accessories on Kijiji or Craigslist. Some people would never consider used items for their child, but as a parent, I can tell you it’s worth it. Babies grow fast; quite often the things you find are gently used or like new. You can easily find a bundle of clothes that’s 75% cheaper than the retail price. Big-ticket items such as strollers, cribs, nursing chairs can also be heavily discounted since parents will have no use for them once their child outgrows them.
Another way to save is to be smart about where you shop and how you shop. PC Optimum is the loyalty program at Loblaws owned grocery stores, Shoppers Drug Mart, and Esso/Mobil gas stations. If you combine that with a PC Financial credit card, you’ll earn points fast. Use those points to get discounts on food and merchandise. You can take things a step further and join PC Optimum Insiders, allowing you to earn even more points and free grocery pickups. Read my PC Optimum Insiders review and find out how I save big with it.
Set up a Registered Education Savings Plan
If your budget allows it, setting a Registered Education Savings Plan (RESP) as soon as they’re born can be incredibly beneficial. An RESP is a registered account that is meant to be used for the future cost of your child’s education. Although you won’t get a tax break when contributing, when the funds are withdrawn in the future, they’re taxed under your child’s name. Since your child will likely have education credits available and a low income, they probably won’t be taxed much, if any.
The other major advantage of an RESP is that your contributions will be matched 20% by the government, thanks to the Canadian Education Savings Grant (CESG). There’s a yearly match limit of $500, so that means if you contribute $2,500 each year, you’ll get the full grant. There’s a lifetime CESG limit of $2,500, so it pays if you’re making regular contributions. It’s also worth mentioning that lower-income families may qualify for an even higher match.
Update your will and benefits
When your child arrives, you’ll likely be overwhelmed as a new parent. There are so many emotions, and a lack of sleep will be something you’ll have to deal with. Despite all of this, you need to stay focused and ensure your will and benefits are updated.
With your employee health benefits, there’s usually a specific window where you can add your child’s name with no loss of coverage. For example, you might have 30 days from the date of their birth to add them. As long as you do it within that period, you’ll likely have no issues claiming benefits for them. If you miss that window, your child will still be covered, but you’ll probably have to do extra paperwork until they’re formally added to your benefits plan.
As for your will, the odds are that many new parents don’t even have one set up yet. You’ll want to take care of this as soon as possible in the rare event the unthinkable happens. Wills can be done via a lawyer or even online these days. It’ll take you less than an hour, and you’ll have peace of mind knowing that your last wishes will be respected.
Get life insurance
If you don’t have life insurance, now is the time to get it. I can’t stress this enough as having a child means they’ll rely on your income. If you were to suddenly pass, your surviving family members could struggle financially to get by. Having life insurance will ensure that your family is taken care of.
Assuming that you’re relatively healthy, health insurance isn’t even that expensive. How much you’ll pay each month depends on your age, gender, health, and how much coverage you want. Generally speaking, the amount you want should cover funeral costs, the remaining balance on your mortgage, and future education costs. Some parents will even choose a policy that leaves enough money until their surviving children are independent. No one ever wants to cash in a life insurance policy, but if it comes to it, they’ll be glad that money is available.
Managing your money as a new parent can be tricky. Your budget will always change, so you’ll need to make adjustments accordingly. Try not to obsess over every penny, but think about your short and long-term goals when you’re planning.