JUNE 15, 2023
By Andrée-Anne Guénette

Starting a family is an exciting time in your life. It can also be overwhelming thinking about all the ways your life will be changing. Not to mention how you will pay for all of it. 

So, how much does it cost to raise a child in Canada? There’s no official Canadian government estimate and recent numbers are hard to come by. Already in 2015, MoneySense.ca crunched the numbers. The result: a cool $13,366 a year, per child, until age 18. And that's before recent spikes in inflation and rising costs in post-secondary education.

Of course, the number can vary depending on:

  • where you live,
  • your income,
  • how many children you have, and
  • what you hope to offer your kids.

Here are some important financial steps you can take right now to ease your worries. 

1. Get the financial assistance you’re entitled to in the first year

Baby’s first year is a double hit for most parents. Your costs go up, while your income goes down when one or both parents take parental leave.

Luckily, maternity and parental benefits can help ease the financial impact. Parental leave benefits from Employment Insurance (EI) come in 2 parts. First, a maternity benefit that pays 55% of the mother’s average weekly earnings for 15 weeks. The maximum is $650 a week (as of June 2023).

You can then choose the parental benefit that works best for your family:

  • The 35-week parental benefit, which pays out at the same percentage. One parent can take all 35-weeks or parents can share.
  • Or the 61-week extended parental benefit, which pays 33% of average weekly earnings. Both parents can share.

In addition, there’s the Canada Child Benefit, a tax-free monthly payout.

With one child under 6, your maximum benefit would be $583.08 a month (or $6,997 a year). That amount falls to $522.91 a month (or $6,275 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. 

2. Make a realistic family budget

Kids go through a lot of stuff in the first few years. From diapers to daycare costs, the dollars can add up.

Drawing up a budget can help. The task can sound a little tedious but knowing where your money is going can be reassuring. When building a budget, think about:

  • Basic living expenses like housing, transportation and food.
  • Home essentials like internet service, utilities and furniture.
  • Personal items like clothing, pharmacy supplies and medical costs.
  • Children’s expenses like childcare, clothing and supplies. 

Need help creating a family-friendly budget?

Get started in a few clicks with our budget calculator

3. Make savings part of your budget, including for your child’s education

Make a budget that is realistic. That means planning for unforeseen expenses, like a gap in employment or even a pandemic. Aim to build an emergency fund with roughly three months of your net income. A tax-free savings account (TFSA) is a great place to keep those savings. All investment earnings will grow tax free. And you can access it anytime.

A good budget also includes planning for the future. Think of it as ‘paying yourself first’. Think of setting up automatic withdrawals from your pay to go directly into your savings:

  • Save for retirement by contributing to your RRSP and/or your workplace pension plan.
  • Save for big-ticket items and projects by contributing to your TFSA.
  • Save for your child’s education by contributing to their RESP.

registered education savings plan (RESP) is a government-sponsored plan to encourage post-secondary education. You can contribute up to a lifetime maximum of $50,000 per child until the year your child turns 17. Those contributions grow, tax-deferred, until your child starts their studies. Your future student will pay taxes on the RESP payout, likely at a much lower rate.

The best part? The government pitches in more money with the Canada Education Savings Grant (CESG). How does it work? It pays an additional 20% to your child’s RESP, up to $500 per year if you contribute $2,500. There is a lifetime maximum of $7,200 in CESG per child.

Certain lower-income beneficiaries may even qualify for additional CESG.  

Setting up an RESP is easy and the plans are flexible. Don’t worry if you can’t chip in the maximum $2,500 a year right away. Putting in whatever you can afford – even just $50 or $100 a month – is a start. You can increase your contributions as your income increases. 

Want to know how much you’ll need to save for your child’s education?

Try our RESP calculator

Remember, anyone can pitch in to your child’s RESP – not just parents.  An RESP contribution makes a great birthday, graduation and holiday gift. So get grandparents, relatives and friends involved.

4. Write a will

The thought of writing a will during some of the happiest moments of your life may not appeal to you. But providing for your child if the worst happens can bring some peace of mind. A properly written will allows you to:

What if you die without a will? The court system could be left to make the important decisions about your child's care and inheritance. Find a lawyer to help guide you through the process. It’s the best way to make sure yours and your child’s wishes are respected.

5. Buy life insurance, if you haven’t already

For a parent, life insurance is almost as critical as patience. After all, life insurance offers the financial security of the people who depend on you. And no one depends on you more than your children.

You might already have life insurance, through your work benefits or through a policy you already hold. There is no “one-size-fits-all” approach to life insurance. Term life insurance protects your dependents if you die within a set period. Permanent (or whole) life insurance provides guaranteed protection for life. The type of life insurance you choose will depend on:

  • Your personal needs and current situation,
  • The stage of life you’re at, and
  • What you can afford.

Are you unsure of how much coverage you need? Our life insurance calculator can help. 

Get a free life insurance quote and apply online today with Sun Life GO.

Get a life insurance quote online

6. Find out more about critical illness and/or disability insurance

You do what you can to take care of your health and no one likes to think of the worst-case scenario. But the truth is, no one is immune to injury or illness. How would your family pay for everyday necessities without your income? That’s where critical illness and disability insurance can help.

How do you know which one is right for you? While they both provide money in cases of illness or disability, they work in different ways.

  • Disability insurance replaces a portion of your income if serious injury or illness leaves you unable to work.
  • Critical illness insurance provides a tax-free lump sum in case of a diagnosis. It must be for a life-threatening conditions covered by your policy. You must also 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. Our critical illness insurance calculator can help estimate the coverage you need. You can also get a free quote and apply for critical illness insurance online with Sun Life GO.

Becoming a parent is life-changing time of adapting to new experiences. It can help to ask the pros for good advice. The same is true of your finances. A Sun Life advisor can help you build a financial plan that fits your family’s needs.

An advisor can help put together a solid plan that suits your goals.

This article is meant to provide general information only. Sun Life Assurance Company of Canada does not provide legal, accounting, taxation, or other professional advice. Please seek advice from a qualified professional, including a thorough examination of your specific legal, accounting and tax situation.