Starting a family can be overwhelming. Be sure to keep these financial steps in mind.
While personal finances may not be on your mind (likely getting enough sleep is), here are five important things to consider when bringing your bundle of joy home for the first time.
1. A social insurance number (SIN)
To set up registered education savings plan (RESP) in your child’s name and to enable them to work in Canada in the future, they will need a social insurance number. Most provinces offer a Newborn Registration Service that allows you to apply for a SIN along with your child’s birth registration. In British Columbia and Ontario, you can apply for their birth certificate at the same time.
2. Baby comes first – but don’t forget about your other financial goals
Children can be costly: food, childcare and education costs are just some of the expenses you will need to add to your budget. New parents often prioritize those costs over their own financial goals, such as saving for a home, vehicle or vacation. Remember to pay yourself first and benefit from the power of compounding interest (making interest on your already-earned interest) to increase your savings.
3. Start saving for post-secondary education
With the average full-time Canadian undergraduate student paying annual tuition fees of nearly $6,0001, post-secondary education can be an overwhelming expense. A registered education savings plan (RESP) can help get you closer to that goal. Not only does the money grow tax-free within the plan, but the government chips in with substantial grants. Find out more about RESPs here.
4. Plan to protect your family’s financial security if the unexpected happens
It’s not easy to think about. But you need to help ensure your family will be taken care of financially if you or your partner died unexpectedly. Once you’ve calculated how much you’ll need to pay off your mortgage, help put your child through post-secondary school, and replace your lost income, you can approximate how much life insurance you may need.
Also, consider these basic estate planning steps for new parents:
- Create an inventory of assets and debts and store it in a safe place that only a trusted person can access.
- Review your insurance policies and update beneficiaries if any changes are needed.
- Prepare a will and identify the person you would request to be the child’s guardian.
5. Budgeting for baby
When infants first come home, the financial resources you require to take care of their needs may be basic. But as they grow, previously unconsidered expenses – such as increased health insurance premiums – can surprise parents. That’s why it’s important to start your budget now. Setting up a category just for your child and logging all childcare expenses under it makes it easy to see how much you’re spending.
Getting your finances in order is a great way to manage the challenges of being a new parent. And hey, as they grow up, your child may even pick up a few tips!
1Statistics Canada, University tuition fees, 2014/2015, http://www.statcan.gc.ca/daily-quotidien/140911/dq140911b-eng.htm