Welcoming Your New Baby

Budgeting for financial readiness as new parents

Preparing for children is an exciting moment in the lives of parents. There are so many wonderful events and moments to look forward to with your little one(s). There is also the responsibility of being financially prepared. Although unceremonious to think about, children are expensive to raise. These finances must be considered when planning for their well being and your own.

Everything from education to hobbies, food, diapers, daycare and health care must be accounted for. As new parents, you will also want to plan for unforeseen events like sick days or emergencies that will result in lost wages should a parent have to miss work.  Preparing for these financial circumstances ahead of time can alleviate your stress and protect your budget.

We’ve created 5 easy steps to financially prepare and protect your growing family:

1. Create or Recreate your financial plan: Having a budget is a great way to ensure your family is financially stable. Whether you have an existing plan or are creating one for the first time, keep your plan child-focused! Have a discussion with your partner about your finances. Make sure to include plans and options for parental leave, single income budgeting and day-to-day financial responsibilities.
2. Save your money: In addition to your personal savings, you will want to create a separate savings account for your child/children and the associated expenses. This account can include deposits from the Canada Child Benefit, a percentage of your own income, monetary gifts etc.
3. Save for post-secondary education:
   Pursuing post-secondary education is a milestone in your child’s life. It is also one of the biggest expenses you and/or your child will incur. Prepare your child to be as debt free as possible with the following:
   1. Open a Registered Education Savings Plan (RESP) while they are young and make consistent contributions. The federal government will add 20% up to $2,500.00 for annual contributions. That means they’re giving you’re a FREE $100.00 every time you save $500.00 in your child’s RESP.
   2. Consider opening additional savings accounts such as Tax-Free Savings Accounts for your child. They are a great way to save additional funds to help ease the burden of debt when pursuing post-secondary education.
   3. Get your child a social insurance number as soon as possible. In Ontario, you are prompted at your child’s birth to sign up for their social insurance number. If you haven’t done so yet, do so right away to get the most out of your contributions.
4. Protect your family:
   If your employer offers your benefits such as dental and health coverage, review your coverage. You want to ensure your coverage extends to protect your family. If so, you will want to redeem this coverage and take full advantage of your benefits.
5. Life happens, plan for unexpected events:
   Although it seems impossible to consider, you are never too young to prepare a will. By doing so, you are relieving the unnecessary burden of estate planning during a difficult time and protecting your family and children.

The best way to prepare for life as a parent is to ensure your family’s financial well being. Plan for a financially healthy future, so you can focus on the best parts of being a parent – watching your child grow!

The big ways that little one will change your life

In Canada, around 400,000 children are born annually. Having a baby enter your life will change everything as you know it. If you’re expecting to become a parent, or just curious about how parenthood shifts your world, here are 5 ways a baby will change your life forever.

1. Baby runs the schedule: Once your family grows to include a newborn, your time becomes theirs. Your schedule changes from “me time” or “yoga class” to time for feeding, diaper changing, sleeping, and more diaper changing. Believe it or not, these seemingly small tasks can quickly accumulate. Before you know it there won’t be enough time in a day! Adjusting your schedule is a big part of having a baby. Although this stage can be stressful, always remember these moments are short so soak it in. They are only newborns for such a short period of time.
2. Forget the housework & relax: Everyone will tell you “sleep when the baby sleeps”, and as a new parent, you know how impossible this seems. While your little bundle sleeps, you need to catch up on all the little things around the house that have taken a back seat. The chores can quickly seem overwhelming. Take this time to refocus your priorities. Housework can wait, your priority should be to make sure YOU are healthy. Make nap time “you” time. Catch up on sleep, relax, read a book, or any other activity that helps you recharge mentally and physically.
3. Living on a new budget: Your small bundle of joy seems to do nothing but eat, sleep, and use up diapers at an incredible rate and yet you’re baffled at how expensive such a simple schedule is. In the first few months of parenthood, you may be living on a single or reduced income if you or your spouse (or both) take parental leave from work. In order to pay for all those diapers, make sure you take full advantage of government parental benefits offered to you, as well as any employment benefits that apply to your leave. If you’re planning for a newborn, it may be beneficial to try living on a reduced income for a few months prior to your child’s arrival. It’s a great way to budget for what you really need and what you can afford while on parental leave.
4. Paying your bills: With a newborn in the house, taking care of your financial obligations should be something you plan for ahead of time. Take time to streamline your bill payments through “direct withdrawals” or “pre-payments” where possible. Speaking with a financial advisor can assist you with this process so you can stop worrying about the bills and instead spend time enjoying your baby.
5. Planning for the future: When a baby joins your family, the future suddenly seems less distant. As a parent, you become responsible for their well being as they grow into adulthood. This responsibility can cost you more than $200,000.00 over the course of 18 years. Saving money, even a little at a time, for future expenses can help manage the costs of raising a child. A financial advisor can work with you to determine the best options to plan for the future of your child and your family.

Getting the most bang for your child’s education savings buck 

A post-secondary education can be one of the biggest financial decisions your child makes in their life. Having savings put aside for them to pursue their education can help them focus on their goals without worrying about the financial implications.  When you start saving for your child’s education, it’s important to make sure the money you’re saving makes the most impact for them down the road.

The average cost of post-secondary education in Canada.

Canadian post-secondary education is an expensive endeavour. It costs the average student more than $15,000 annually for a full-time program. With most full-time programs running over a four-year period, the costs to students can quickly skyrocket well over $65,000.00 to finish their studies. These costs are likely to increase over the years, making it even more expensive for your child to attend school.

The benefit of post-secondary education.

Pursuing a post-secondary education can give students the opportunity to expand their knowledge base, challenge them to new ways of thinking and open doors to new opportunities. It can also help your child land a great career! Graduates of Canadian post-secondary schools earn approximately 40% more than their counterparts. They also have the added benefit of higher job security in their positions.

How you can save for your child’s education; 3 ways to accumulate meaningful savings for your future student.

1. Apply for a Registered Education Savings Plan (RESP) early: By opening a Registered Education Savings Plan (RESP), you will be eligible to receive the Canada Education Savings Grant (CESG) for your child. This grant is applicable to those who contribute $2,500.00 to their RESP, and you can receive up to $7,200.00 in CESG’s. 
2. Look for tax-free growth opportunities: When you contribute up to $50,000.00 to your RESP, or your own limit in a Tax-Free Savings Account (TFSA), your money will not be taxed while it grows for as long as that money remains in its registered account. Dividends, Capital Gains and Interest Income are not applicable to tax. Thus, your money will grow towards your goals in these accounts.
   
   Things to note when opening a registered account; when your child chooses to withdraw the money from your RESP in order to pay for their post-secondary education, the amount withdrawn will be taxed (likely at a lower rate for your child). When withdrawing your money from a TFSA, the withdrawal is not subject to tax.
3. Maintain a diverse portfolio: Creating a diverse investment portfolio is an excellent way to manage the risks of investing while growing your savings. When building your diverse portfolio, consider including mutual or segregated funds. Building a portfolio using these tactics is a great way to grow your money according to your timeline. You can plan your investments to align with goals while also accounting for your own risk tolerance. As your child grows, you can adjust your portfolio to reflect the market and your own savings goals. When planning for your child’s post-secondary education savings, speaking to an advisor can be an excellent resource to help you maximize the growth of your money. An advisor can offer you insight into these strategies and their potential to ensure your money goes as far as possible.

Putting your child’s education savings plan first, with a backup plan 

It’s impossible to predict the future your child will want for themselves.  Although we have goals and dreams that we would love to see our children achieve, it is your job as a parent to plan for their career goals-whatever they may be- as best as possible. When you start a savings plan for your child’s education early, you give them the freedom to choose their own career path.

How much will an education cost?

As a parent, one of the biggest concerns you and your child will face is the rising cost of education. Canadian post-secondary institutions program costs will vary from school to school, and from program to program. For reference, the approximate average costs of an undergraduate program for the 2014 year were as follows:

1. $4,500.00 for an unspecialized bachelors’ degree program
2. $7,000.00 for an engineering degree program
3. $10,500.00 for a law degree program
4. $12,900.00 for a medical degree program
5. $18,000.00 for a dentistry degree program

So how can you help save for your child’s future while maintaining flexibility in their choices? Here are three excellent strategies to prepare for whatever career path your child pursues.

1. RESP’s, TFSA’s, and personal savings accounts: RESP’s have enticing benefits to help you grow your money for your child’s future. When contributing to your RESP, you are entitled to the Canada Education Savings Grant (CESG) which boost your annual contributions by 20% to a maximum of $500.00 per year or $7,200.00 per child. With your RESP, taxes are deferred on your contributions until the money is withdrawn, giving your money great growth potential.
   
   When opening an RESP for your child, it is important to note that RESP’s have a lifetime contribution limit of $50,000.00 and the money withdrawn goes towards a qualifying post-secondary program.
   
   If the limitations of opening an RESP don’t present as much growth potential as you would like to see, you may consider also opening a Tax-Free Savings Account (TFSA) and/or an open savings account. These accounts operate with fewer restrictions and allow you more flexibility with your money. TFSA’s allow annual contribution limits of $5,500.00 for tax-free growth and you maintain the option to withdraw this money for any reason, educational or otherwise. Creating a non-registered/open account operates on the premise that you can contribute as much as you want and withdraw at your discretion.
2. Be prepared to adjust your plan: As your child grows and changes, so will your goals for your savings. While your child starts to specify their career goals, you should be prepared to assess and adjust your savings plan. The time to assess your current plan begins when your child shows interest in pursuing an expensive degree program or, alternatively, chooses not to pursue a post-secondary degree. If the latter is the case, we emphasize the benefits of the TFSA’s  and non-registered accounts to maximize your savings.
3. Take advantage of additional resources to access more money: Saving for your child’s education is not always something you can do alone. If you’re looking for additional money to assist in your savings plan, consider the following: Scholarships, grants, and bursaries offered through the government, school, or professional industries; Part-time employment for your child to contribute to their savings plan; Student loans and personal lines of credit

As you take the steps toward saving for your child’s education, consulting an advisor can be a great resource. An advisor can offer recommendations to help you maintain a flexible plan while maximizing your savings potential. With the right plan, your child has the freedom to pursue the career they’ve always dreamed of without struggling with the cost of education.

Saving for your child’s future

Becoming a parent means wanting your child to live their best life. You want them to enjoy all things in life you may have missed out on growing up. Giving your children the best is an excellent goal, but is it affordable? Between food and clothes, sports, hobbies, family excursions and so much more, the cost of giving your child “the best” becomes very expensive. For more than 35% of parents in Canada, borrowing money to pay for this lifestyle for their kids is not out of the norm.

As a parent, how can we balance this desire to give our children everything while also saving for their future? In order to give our children the best life possible, we must be financially responsible in their name. As the cost of living and post-secondary education continues to rise, saving for your child’s well being is a non-negotiable expense. We have come up with a five-step strategy to help you start saving for your child’s future because the best gift to give to your children is a future of financial stability.

Don’t delay!

Start saving now. Every day you delay is time and money that can be contributed to your child’s future. The sooner you start saving your money, the more time your money has to grow with interest. Saving is not impossible. Start by depositing small amounts on a consistent schedule. By depositing regularly, your savings have more growth potential! You will have a longer period to save without relying on the market.

Save amounts that are affordable.

Deposits into your child’s savings plan don’t have to break the bank. Determine an amount that fits comfortably within your family’s budget and is enough to meet your savings goals. An advisor can help you determine an amount and frequency that fits into your budget.

Take advantage of tax-free & tax-deferred savings.

Open a Registered Education Savings Plan (RESP) and benefit from the Canada Education Savings Grant (CESG). RESP’s are a great way to maximize your money’s potential towards a qualifying post-secondary program.

Be flexible in your planning.

Your child may decide not to pursue post-secondary education. It is important to have a plan in place that flexible around their future. A Tax-Free Savings Account (TFSA) is a great compliment to your RESP and allows more flexibility in accessing your money. Withdrawals from a TFSA are tax-free and can be used for any purpose.

Be prepared for anything that may come your way.

We all hate to think of it but preparing for worst-case scenarios is part of parenthood. Should your child get seriously ill, you will want to have a financial plan in place as well as a critical illness insurance coverage policy that extends to your child.

Giving your child the best in life relies heavily on being prepared. Having a financial plan for their future ensures that they can grow and enjoy life while setting them up to become financially self-sufficient.