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Managing your money

June 11, 2019

Should you be a stay-at-home parent or put your kids in daycare?

Having trouble choosing between paying for child care or staying at home? Here’s how to figure out which path best suits your financial situation.

Do you have a baby on the way, or are you thinking about starting a family? You’ll have a lot of decisions to make. One of the biggest will be whether to send your baby to daycare after your parental leave ends or become a stay-at-home parent. 

Some parents return to work because they need their salary to help pay the cost of raising their kids. Some have businesses to run. Others may want to stay home so they can spend time bonding with their children and fostering their development. Still others simply can’t imagine leaving their little ones with a stranger.

When it comes down to the classic daycare or stay-at-home parenting debate, one solution isn’t by definition better than the other. When you’re trying to decide, there can be a lot of emotion involved that you can’t really quantify. But you can quantify your financial situation. Here’s how to work out which path is right for you financially:

Do you choose daycare and go back to work?

From long waiting lists to monthly fees, here are a few factors to think about.

The cost of child care. Do you know how much daycare costs in your area? According to the Canadian Centre for Policy Alternatives (CCPA), outside Quebec, you could be looking at a monthly cost somewhere between $650 and $1,700. (It’s a different story in Quebec, where daycare is subsidized by the province.) And that’s just for one infant. You’ll have to pay more if you have more than one child needing care. Another point: CCPA’s annual reports show that child-care fees across Canada commonly go up faster than the rate of inflation.

Median monthly full-time child-care fees for infants and toddlers*
Province City

Infants
(Usually under age 2,
varies by province)

Toddlers
(18 mo. to 3 yrs.,
varies by province)

Quebec
Montreal
Quebec City
Longueuil
Laval
Gatineau
$175
$190
$190
$190
$190
$175
$190
$190
$190
$190
Manitoba
Winnipeg
$651
$451
Prince Edward Island
Charlottetown
$738
$608
Saskatchewan
Regina
Saskatoon
$845
$900
$650
$790
Alberta
Edmonton
Calgary
$975
$1,100
$875
$1,030
New Brunswick
Saint John
$868
$716
Newfoundland and Labrador
St. John's
$977
$726
Nova Scotia
Halifax
$967
$845
British Columbia
Surrey
Burnaby
Richmond
Vancouver
$1,250
$1,260
$1,335
$1,400
$1.250
$1,200
$1,200
$1,407
Ontario
Ottawa
Brampton
London
Markham
Vaughan
Kitchener
Hamilton
Mississauga
Toronto
$955
$955
$1,229
$1,370
$1,411
$1,495
$1,497
$1,591
$1,685
$1,009
$190
$1,131
$1,130
$1,204
$1,139
$1,156
$1,269
$1,367

*From Developmental Milestones: Child care fees in Canada’s big cities 2018. Canadian Centre for Policy Alternatives (CCPA)

Sometime parents decide to stay home just until their children become toddlers, simply to avoid the higher cost of infant care. 

Budgeting for daycare. Now that you’ve seen the cost, ask yourself this: Can you squeeze it into your monthly budget? If not, where can you cut back to find it? Look at your daily, weekly and monthly spending. Bills and living expenses aside, focus on your disposable income. You may have treats like vacations, shopping sprees or restaurant dining that you could cut down or even cut out.

Finding the right child care. Are there high-quality daycare facilities in your area? Then try to get on the waiting lists early. This means applying for a top-rated daycare even before your baby is born. That way, you can avoid the stress of scrambling to find someone to look after your child at the last minute or right before you return to work. Some provinces have daycares that may charge a waiting-list fee. Ontario remains the exception since it banned child-care waiting-list fees back in 2017.     

How to cut back on daycare costs. Are your parents healthy? Do they live close to you? Then ask them if they’re willing to occasionally babysit. Even if they’re only available one day a week, it can help reduce the overall cost of child care. Or consider sharing a babysitter with a friend. In addition to cutting down on costs, a nanny-share also gives your child a chance to socialize and interact with other little ones.

Is becoming a stay-at-home parent right for you?

Are daycare fees too much for you? Or, perhaps you’re not ready to leave your baby in someone else’s care? Here are a few things to think about before you decide to take this route: 

Saving money on expenses. Think of all the things you won’t have to pay for if you stay at home. Transportation to work, lunches out, new work clothes and dry-cleaning and, of course, daycare.

Budgeting on a single income. You may be a single parent or you may be holding down the fort at home while your partner works. Either way, you’ll have to find a way to live on one income. Wondering if you can actually do it? Take a test drive and see. If both you and your partner are employed, start saving the whole of one of your incomes in a tax-free savings account (TFSA). Then see if you can fit your family budget into the remaining income.

Take a shared parental leave. If you have a partner or are a co-parent, think about taking turns with parental leave. This way, both of you get to spend time with your child and you can put off daycare a bit longer. Canada’s Parental Sharing Benefit allows parents to share in one of two ways. They can split up to 40 weeks of Employment Insurance (EI) benefits on a 12-month standard leave. Or they can share 69 weeks of EI benefits on an 18-month extended leave. Remember that an extended leave doesn’t mean more money – it stretches the same money over a longer time. (See chart below for details.) So you’ll have to support your family on a reduced cash flow for even longer.

Need more time away from work? Then start saving up your vacation days now. (Check whether your employer limits the time you can save.) This way, you can take extra paid time off after the baby is born.

Parental leave and benefits: How long and much?
Parental benefits options How many weeks of payment will you get?* How much can you get per week?
Standard parental benefit
35 weeks
55% of your average weekly earnings up to $1,021 in 2019, for a maximum benefit of $562 per week
Extended parental benefit
61 weeks
33% of your average weekly earnings, up to $1,021 in 2019, for a maximum benefit of $337 per week
Shared parental benefit – standard
40 weeks
55% of your average weekly earnings up to $1,021 in 2019, for a maximum benefit of $562 per week
Shared parental benefit – extended
69 weeks
33% of your average weekly earnings up to $1,021 in 2019, for a maximum benefit of $337 per week

*You can get the extra five weeks of standard parental benefits and extra eight weeks of extended parental benefits only if your child was born or adopted on or after March 17, 2019. For more information, visit canada.ca.

Start preparing financially for your family

You may go with daycare or stay home and live on a single income. Either way, having a new baby will affect all aspects of your finances, including insurance and estate planning. For example, you may consider life insurance to protect your family. You’ll also want to update (or write!) your will, and name a legal guardian for your child. Not sure where to start? An advisor can help you put together a solid plan that suits your family’s goals and needs.

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