Last updated on February 4th, 2020
As you anticipate the arrival of a new baby, thoughts of sleepless nights and diapers may come to mind. You’ll put all that aside and most importantly focus on the lifetime present you are getting from adding a new member to the family, one of unlimited love. Stress from your finances is the last thing on your mind. Careful planning beforehand will put you at ease and make sure you are prepared for the new addition to the family.
When expecting a baby, three of the biggest financial decisions are as follows:
Reduced Maternity Leave Income
Moms that are working will probably receive a drop in income once maternity leave starts. The amount this will change is determined by pre-maternity leave income; the monthly amount will be 55% of income up to $537 per week. This results in you receiving less than 55% of your income if you make over $50 800. The Government of Canada’s website has a full overview of EI maternity and parental benefits if you would like to take a look.
How to handle this drop of income: Families that are used to living off of one income can transition more smoothly than families that rely on two incomes. To make this shift manageable, it’s a good idea to create a new budget to include the income drop, which you can use in the months leading up to your baby’s birth. Any excess can be put into savings for your child as a bonus.
Start on your RESP
A great way to kick start your money saving for your child’s education with the Canadian Government is using the Registered Education Savings Plan (RESP). The government will deposit 20% of annual contributions into your RESP every year, up to a maximum of $500 and a lifetime limit of $7200- all as part of the Canada Education Savings Grant. Therefore, to attain maximum benefit, you must contribute $2500 per year. This results in $45 000 by the time your child is 18! This could add up to even more depending on investment performance and compound interest.
You can open an RESP through a bank, discount brokerage or financial advisor. This includes a number of investment options available- speak with one of our financial advisors today! Contact us at Arbetov Insurance for more details.
Added expenses of a new baby can hit hard. This is why the extra costs associated with parenthood are important to put into the picture and take into perspective. For example, a baby starts off using 10-15 diapers a day. It might be in your best interest to set up a baby fund to manage these costs. Carefully planning out your purchases of essential items when they are on sale will guarantee you to get the most value out of your money prior to the baby’s arrival.
If you’ve already considered the above, you’re off to a good start! You do however have to remember that this is just the beginning, taking care of a child is a full time job. As the child grows, new expenses will come up such as food, clothes, activities, and possibly a new home for your growing family! All these will impact your budget greatly. Just make sure to plan ahead of time, make sure there is always a little extra saved up. It’s important to consider future costs to lead you in a financially stable direction for you and your children.
Our Advice to you
As a new parent, you definitely have a lot on your plate to worry about. Getting started with your financial situation under control will set you in the right direction, and allow you to focus on the more important things in life, like family; a stable financial situation will keep your mind at ease instead of contemplating on how to pay for it all. For any further questions, contact us at Arbetov Insurance, where helping you in your financial plan is our job!