Some experts say that new parents spend $10,000 during their first year in parenthood. You knew having kids wasn’t cheap, but that’s a lot of money on top of your regular living expenses. You would need to come up with $250 a week for nine months to save that amount of money ahead of the baby’s arrival. That’s around $1000 a month! The key is to start early.
Start early.
If you are planning on starting a family soon, and have a couple of years to build up the resources required, you might need only $96 a week. A Tax Free Savings Account is a wonderful vehicle for this need, as it grows tax free, and you can get at your money any time, again tax free.
Budget.
The word budget gets such a bad rap. The reality is that knowing where your money is going is the foundation of your plan, at any time in your life. What kind of new expenses lie ahead for you and your growing family? Clothes, baby supplies, food, toys…they all add up. Making room in your budget to cover these costs, as well as continuing your own savings plan after the baby arrives is a key focus. This is not the time to be accumulating debt—a cash flow plan will help to avoid this pitfall.
Talk to your partner.
Talking money is hard for a lot of couples. Don’t wait until after baby is born to have a conversation about changes in your financial life. Being on the same page with your partner means less stress down the road, and ultimately more happy memories with your new family. For our clients, we act as the guide for these discussions—we ensure that our clients come in together to talk about their plans.
Talk RESPs with a professional.
You can’t open a Registered Education Savings Plan until your baby is born and has a SIN number, but you can certainly start talking about your hopes and plans for saving for their future. Plus, before baby is born, you’ll have a lot more time to deal with the details, and once he/she is here, it will be an easy paperwork meeting to get the savings started (and start getting free money from the government). Yay, free money!
Protect your family
No one likes talking about the what-ifs, but now that there is someone who is 100% dependent on you and your family income, covering the risks should be top of the list. The younger you acquire life insurance, the less expensive it is for you. Whether your need is temporary (just until you child is old enough to support himself) or if you want a more permanent need (coverage for life); this step is one not to be missed. We help our clients to decide what the best insurance plan is for them, and we can survey the various life insurance companies in Canada to ensure you are getting the best rates.
Summary
Getting hand me downs from friends and family is a great start, but having a complete plan for the new addition to your family doesn’t have to be as daunting as you might think! We help our clients plan for these exciting times, and we even like to think we are helping to create a start to a solid financial legacy you can pass on to your children. Knowledge is power after all.