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Financial planning tips

June 14, 2017

5 money tips for new dads (and moms)

If this is your first Father’s Day, congratulations! These 5 money tips will help keep your kids from draining your bank account.

Whether this year marks your first Father’s Day as a parent or your 17th, nobody has to tell you that raising kids isn’t cheap.

How much does it cost to raise a child in Canada?

There’s no official Canadian government estimate, but the US Department of Agriculture pegged the total in 2015 at $233,610 (in US dollars) per kid in a 2-child, married-couple, middle-income household.

That’s staggering, but don’t be discouraged. Canada’s Fraser Institute takes a different view, with a 2013 report estimating $3,000 to $4,500 per year per child – which would work out to $81,000 through age 17, at the high end.

Whether you buy into the 1st number or the 2nd (or another one entirely), there are ways to keep your children from draining your bank account. Here are 5 everyday tips:

1. Draw up a budget

In baby’s 1st year, parents face a double hit: a jump in costs and an income cut when one or both parents take time off to spend with the new arrival.

Luckily, planning ahead and factoring in parental benefits can help ease the blow. Parental leave benefits from Employment Insurance (EI) come in 2 parts, starting with a maternity benefit that pays 55% of the mother’s average weekly earnings for 15 weeks, to an upper earnings limit of $51,300 a year (as of January 1, 2017). That amounts to a maximum of $543 a week.

Then there’s the 35-week parental benefit, which pays out at the same percentage and can be taken entirely by 1 parent or shared.

Also, the 2017 federal budget paved the way for parents to spread their leave over 18 months—but the parental benefit falls from 55% to 33% of average weekly earnings in that scenario. This option may be available in 2018.

In addition, there’s the Canada Child Benefit, a tax-free monthly payout. With one child under 6, your maximum benefit would be $533 a month (or $6,400 a year), falling to $450 a month (or $5,400 a year) for a kid between 6 and 17.

However, the benefit changes based on your household income and the number of children living with you. So if you have 1 eligible child, for example, you’ll get the full amount if your household income is below $30,000. If it’s above that figure, your benefit will be reduced by 7% of the amount of your income between $30,000 and $65,000, and by another 3.2% of any income over $65,000.

2. Clean up on diapers

The average newborn goes through around 2,700 diapers in the 1st year. Reducing your costs here could represent significant savings over time and cloth is the way to go.

Here’s a realistic scenario: a 128-pack of disposable name-brand diapers sells for around $35, and an average baby will go through around 22 packs of diapers in the 1st year. That comes out to $770 plus tax.

Throw in the fact that the average baby girl spends 35 months in diapers and the average baby boy, 39 and you’re looking at a potential outlay of $2,000 to $2,500 and maybe more.

Cloth? A 12-pack goes for around $320. True, you’ll use more electricity, water and detergent, but the savings are clear.

3. Second-hand savings

You may be tempted to outfit your new charge with the latest gear, but don’t head off to the mall just yet.

Cribs, change tables, strollers, baby monitors—the amount of stuff kids need in the 1st year is dizzying and will run into the thousands of dollars if you buy new. And sure, that $80 sweater would look great on Junior, but with the average child growing about 2.5 inches per year through age 10, according to data from the Children’s Hospital of Wisconsin, it’ll be a hand-me-down in no time.

That’s where friends and family come in: The more you can borrow or swap, the more you’ll save. Other options? Classified sites like Kijiji.ca, local buy-and-sell Facebook groups and consignment shops.

4. Look for items that do double duty

“I recommend looking for gear that’s multi-purpose or can grow with your child,” says Karen Mills, a mom from Parry Sound, Ont., “Like a car seat that converts into a booster seat, or a pack ’n’ play that has a bassinet insert for infants but serves as a portable crib later on.”

5. Libraries – the parent’s best friend

Introduce your child to your local branch as soon as possible. This not only helps foster a love of learning, but can save also you cash.

“Rather than always buying my son new books, he has a library card, and we go on regular excursions to the library,” says Toronto mom Miriam Claerhout. “When I hear about a book I think he might like, rather than buy it, I will get it from the library, especially if it’s the first book in a series. If he likes it, I might consider buying more.” 

Libraries also offer free events, such as the Ottawa Public Library’s Every Child Ready to Read program, featuring stories, songs and games for infants, toddlers and 3- to 6-year-olds, as well as family and evening story times for kids of all ages. Check your local branch to see what they offer.

Also look for community access programs such as the Toronto Public Library Foundation’s Museum + Arts Pass and the Calgary's Public Library's Arts + Culture Pass (both sponsored by Sun Life Financial), which provide free passes for families to museums, art galleries and other cultural venues.

COMING UP NEXT: Part 2 of our series looks at longer-term financial strategies for parents, including registered education savings plans (RESPs) and ways to teach your kids how to make good financial decisions.

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