The average cost of raising a child is the subject of some debate, but according to figures calculated by MoneySense.ca, it’s a staggering $253,954. And that's before you send Junior off to university.
So, whether you're welcoming your first bundle of joy or expanding your brood, here are 5 financial steps you should think about taking:
1. Draw up a will
During this joyful period of sleep deprivation, the thought of writing a will may be the furthest thing from your mind. But who will take care of your child if — heaven forbid — you and your spouse both die unexpectedly? A properly written will allows you to designate a guardian to care for your children until they become adults, and to name a property guardian or trustee to manage your money for them. What if you die without a will? Then all core decisions about your child's care and inheritance may be left to the court system to resolve. Find a lawyer to help guide you through the process so you know your wishes will be carried out.
2. Open a registered education savings plan
A registered education savings plan (RESP) is an investment account designed specifically to help you save for your child’s post-secondary education. Not only does the money grow tax-free, but the first $36,000 you contribute is also eligible for a Canada Education Savings Grant of up to $7,200 per child. When should you start? There's no time like the present. Don’t worry if you can’t contribute the maximum $2,500 a year. Putting in $50 per month, or whatever you can afford, is a good start and you can always increase your contributions later.
- Estimate how much you'll need to save with this RESP calculator.
3. Buy life insurance
For a parent, life insurance is almost as critical as patience during feeding time. After all, if something were to happen to you or your spouse, you have to make sure your children will be provided for. If you already have life insurance, then having children (or more children) means you may want to increase your coverage. If you don't have life insurance, which type should you buy? Term life insurance protects your dependents if you die within a set period. Permanent (or whole) life insurance provides guaranteed protection for life.
- Estimate how much coverage you need with this life insurance calculator.
4. Buy critical illness and/or disability insurance
If you’re looking to protect your family, critical illness and disability insurance are arguably as important as life insurance. So which one is right for you? Both provide money in cases of illness or disability, but they work in different ways. Disability insurance replaces a portion of your income if you’re unable to work due to a serious injury or illness. Critical illness insurance pays you a tax-free lump sum if you’re diagnosed with one of the life-threatening conditions covered by your policy, and you survive for the prescribed period after the diagnosis. To help you figure out how much coverage you need, take an honest look at your family’s spending.
- Estimate how much coverage you need with this critical illness insurance calculator.
5. Apply for the Canada Child Benefit
Chances are your kid probably won't be pulling his or her own weight, money-wise, for the next 18 years or so. The federal government helps shoulder this financial burden through the Canada Child Benefit (CCB), a monthly payment intended to help eligible families with the costs of raising children. You might also be eligible for the GST/HST credit.