Having a child is a big deal. I hope you are fortunate enough to be able to make that decision when the time is right for you and your family. Having a child is also very expensive. In Canada having a child costs approximately $243,660 from newborn to 18. Yikes! And that’s not including post-secondary schooling.
So how can you start planning for this?
Well there are a couple of money tasks that need to be part of your baby checklist.
1. Getting pregnant and coping with pregnancy
Yes the first thing on your baby checklist happens to be before you even get pregnant. If you are planning on having a baby you will need to make sure that you have a good prenatal vitamin in your system before you conceive. There is a cost associated with that for the duration of the time it takes to get pregnant, while you are pregnant and for however long you breastfeed, if you do. There is also some advice to men now that they should be taking a multi-vitamin during the conception phase as well.
A preconception checkup is always good to have but as we are Canadian we don’t really worry too much about the costs of going to the doctor. If you don’t have health coverage that expense is something to factor into your baby making costs.
Coping with pregnancy requires things like maternity clothes, nursing bras and some extra money to get through the horrible morning sickness. When nothing fits anymore but yoga pants and you work in an office setting you have to get creative with clothes and maybe pick up some maternity items. A growing mom-to-be will also need things like nursing bras to support her girls and lots of big underwear to support her growing bump.
If you are one of the lucky ones you won’t have any morning sickness and have a really good pregnancy. According to American Pregnancy it’s about 50% of pregnancies so basically that’s a flip of a coin. So assume you will be sick at some point and assume you will have some aversion to food(s) or a combination of the 2. Keep your grocery budget a little flexible during this time. Where you might have enjoyed salads for work every day there is a chance that the thought of that makes you want to throw up and you have to stick with coffee house bagels to get through the day. Since you are growing an organ (the placenta) as well as a child (or 2+) you can’t be too strict on your grocery budget and that will allow you to get through this time which is challenging for many
2. The money – Maternity Leave/Debt Repayment
The next thing on your baby checklist is maternity leave benefits. In Canada a common misconception is that you will get 55% of your income when you go on maternity leave. But that’s up to a maximum amount of income, if you are making more than that you will see a much bigger drop.
In 2017 it was $51,300 and you would get a maximum of $543 per week before taxes. Maternity EI is taxable, common misconception it is not and you can click here for some more information. Also if you are making less than the maximum amount you likely won’t get the full amount. If you are make $40,000 a year you will get only 55% of that which is closer to $423 per week. Remember there is also a 1 week wait period to get the money, recently changed from 2 weeks, so keep some money aside until you do the work to start the claim and the money starts coming in.
Check out the government site with all kinds of information here.
Please note that Quebec is different and you can find the details here.
If you are super lucky you could get an employee top-up from your employer. But there are tax implications from this so keep that in mind and don’t forget to read tip number #4 where I talk more in detail about this.
With less income you will need to make changes to your budget. If you aren’t working you don’t need to pay for things like gas or parking, as well as lunches out. Some other expenses might go up like food and you will get new categories like diapers, formula and children’s clothes. You might even go through more water/gas/hydro being home more often and using things like a washing machine more. Make sure you plan for this and if you can get into your after baby budget ASAP that would help give you a little stockpile of money to help cover off any unexpected bumps that come along.
A word about debt: If you still have debt that you haven’t finished paying off yet make it priority #1. With less money coming in you don’t need to worry about having to stretch an already thin budget to cover off debt payments. Take care of it now so you can take care of the baby without your creditors on your mind. You already won’t be sleeping so you don’t need to think about that too
3. Start-up costs: Baby Gear
The third thing on your baby checklist is baby gear. There are a couple of things that I think when I refer to start-up costs. Things like a crib, car seat, stroller, infant clothes, diapers and formula. This might also include items like breast pumps (if you are willing and able to). This will probably run you about $3,000 to cover off these expenses, including diapers for the first year.
Another tip is to not buy things you need before you actually need them. You won’t need a highchair for the first 6 months so don’t tie up your money in something that you won’t need right away. Same goes for a crib if you get a bassinette; you will need a crib eventually but not right away so you can pass. Or you can just opt for the crib from the beginning to save having to buy both. The only thing you need right away is a car seat since they won’t let you leave the hospital without one. Ask around; see if you can borrow anything from family or friends.
Be careful with cribs and car seats and if you can, buy those things new. Take all the hand me downs you can on everything else. Babies grow quickly and only be in the stuff for a short amount of time. Don’t think giving your baby the best means you have to splurge on brand new everything. The baby won’t care at all.
A big thing on your baby checklist is taxes. Some companies provide a top up to your current salary factoring in your maternity leave pay. Keep in mind that those will both be taxed however it will likely be at a lower tax rate. You might have to pay more come tax time.
Think about it like this:
Scenario #1: In Ontario you have 2 jobs and you were making $25,000 at each that would add up to $50,000. Each pay, for each job, you would get about $215 taken off in federal and provincial taxes. At the end of the year you would pay about $5,161 in taxes. Hold onto that number.
Scenario #2: In Ontario you have 1 job and you are making $50,000. Each pay you would get about $675 taken off in federal and provincial taxes. At the end of the year you would have to pay about $8,107 in taxes.
I used the CRA payroll calculator for this example.
Yes that’s right that’s $2,945 more than if you were to work 2 jobs making the same income. Know that come tax time you will have to enter the total amount earned and you will be required to pay the difference in taxes that you should have paid. To solve this you can get your employer to hold back more taxes or put the money aside and be ready come tax time. But don’t go in unprepared.
In terms of retirement know that any EI you get will not count to your RRSP contribution room. You can put money into your RRSPs, maybe to help offset some taxes. If you do make sure you have the room to do so or you could be penalized for over contribution. There is a lifetime max of $2,000 if you do happen to make a mistake but it’s better to not do that.
The final thing on the baby checklist is housing! Dealing with some type of relocation or renovation before the baby arrives is typical. If you are going to finish a bathroom or to move closer to family any type of spending should be planned. Take an honest look around at your surroundings and imagine your life with a baby there. Living in a 1 bedroom condo? Living too far away from your family? What are the tradeoffs you are going to make to either get a place or make your current place work?
It’s important to look at your home (rented or owned) and think about what you need to do to make it work. Also think about the cascade effects of a renovation before you take out the sledge hammer. For example you might want to set up the nursery but that room is being used for other things and you need to complete 5 other tasks before you can clear the furniture out of that room and begin. To those living in a smaller space, you might need to be a little more creative but babies don’t take up that much room. You can make it work if you really want to stay put. Make sure you understand what you need to do and make this part of your baby plan.
All the Things:
Obviously more things to factor in when it comes to a baby. Saving for daycare and university tuition, birthday parties and the laundry machine is running non-stop. Keep your eye on the future to help plan for whatever baby needs will come up.
There are lots of unexpected things that happen during your pregnancy journey. With a little bit of work a budget shortfall won’t be one of them.
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