How To Prepare Your Finances For A New Baby In Canada

Nothing compares to the magical joy of having a new baby. From the moment you read that positive pregnancy test, your mind begins making plans.

Between scheduling doctors appointments, decorating the nursery, and picking out a name – there are lots of exciting decisions to make.

However, there is one topic that needs your attention before, and right after, baby is born – how to prepare your finances for a new baby.

Here are 10 necessary financial steps to prepare your family for it’s newest member.

Whether this is your first or fourth child, this guide for new parents will explain how to save money for a new baby, what benefits to claim, how to map-out your maternity leave, and how to create a new baby budget.

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How Much Does A New Baby Cost?

 According to MoneySense, raising a child in will set you back a startling $243,660 from infancy to adulthood. That works out to more than $12,825 a year – for everything from swaddling blankets to sparkly heels for prom.

In case you were doing the math in your head, child expenses average around $1098 per month.

For a breakdown of where all that money will go, from birth to age 18, see MoneySense’s The Real Cost Of Raising Kids.

It’s the first year, when parents are managing big-ticket baby expenses on a reduced maternity and parental leave income, that can overwhelm new parents. Debt worries and late night teething sessions don’t mix well.

Luckily there are tips that can help you survive the cash crunch of the first 12 months. With some basic lifestyle changes, new moms and dads can ease any money anxieties and focus on their beautiful new babe.

From getting the most out of government and work benefits, to budgeting for a stroller, here’s everything new parents need to know to get through that first year of babies life debt-free.

Read: How To Budget For A New Baby – First Year Checklist

How To Prepare Financially For A New Baby

Along with the welcome new addition to your family – you don’t want the unwelcome addition of new debt.

Calculating what money you’ll have to work with to cover the cost of having a new baby will allow you to balance your budget.

The first thing you need to do is to determine how much money you will be earning when one parent is on leave.

1) Research Employment Insurance Benefits

In Canada, new parents are eligible for 12 to 18 months of maternity and parental benefits while they stay home to snuggle their newborns.

Be sure to apply for employment insurance benefits (or QPIP in Quebec) as soon as you start your leave, even if you stop working before the babies’ arrival.

Maternity leave benefits are paid at 55% of your weekly average earnings, up to a maximum amount of $573 per week. Following the 15-week maternity leave, either parent can claim 35 weeks of parental benefits at $573 per week.

The difference with the 18-month leave is noticed when your EI Parental Benefits kick-in after the 15 week maternity leave.

During this time period, parents or caregivers will receive 33% of their salary for up to 61 weeks, to a maximum of $344 per week.  

Parental benefits must be claimed within 12 to 18 months after the week the child was born or placed for adoption, depending upon which EI benefits model you choose.

Standard Versus Extended Parental Leave Comparison Table

	Maternity Leave Benefits	Parental Leave Benefits	Total Benefits
12 Month – Standard Parental Leave	$8,595 (15 weeks x $573)	$20,055 (35 weeks x $573)	$28,650
18 Month- Extended Parental Leave	$8,595 (15 weeks x $573)	$20,984 (61 weeks x $344)	$29,579

The Government of Canada has a maternity and parental benefits calculator to give you an estimate of your EI benefit amounts.

Read: How To Choose Between The 12 And 18 Month Parental Leave for an in-depth comparison of the two leave options in Canada.

There are EI eligibility restrictions.

Shareholders of a family business, the self-employed (unless you’re in Quebec or have opted to pay into EI in advance of your pregnancy), and parents who haven’t accumulated 600 working hours in the year before taking parental leave, are not eligible for benefits.

The 600-hour threshold, which equals about four months of full-time work, is important to keep in mind when timing your pregnancy.

2) Find Out If Your Employer Will Top-Up Your Benefits

Some employers offer parental leave top-ups. Top-ups can cover up to 100% of the remainder of your salary for a few weeks or for the entire duration of your parental leave.

If your employer doesn’t offer this incentive, they still may allow you to opt-in to an extended health benefits program. You also may be able to continue paying into your pension while staying home with your new baby.

Either way, it’s worth a trip down to Human Resources to find out what you are entitled to.

Questions To Ask Your Employer:

• how much paid maternity or parental leave you can get
• if you can add any extra vacation time or sick days to your paid parental leave
• does your employer offer a salary top-up & to what percentage of your salary
• if you can continue to pay into the health and dental benefits plan
• how parental leave will affect your pension

3) Apply For The Canada Child Benefit

Once your baby is born, you can apply for the Canada Child Benefit.

The maximum Canada Child Benefit you could get is $6,639 per year for children under 6, and $5,602 per year for children aged 6 to 17. The Canada child benefit is based on your family income from the previous year and the number of children you have.

The Government Of Canada has a calculator to help your estimate who much benefit money you’ll receive.

The Child Disability Benefit is a tax-free monthly payment made to families who care for a child under age 18 with a severe and prolonged physical or mental impairment.

4) Start Saving Money For Your New Baby

Open A New Baby Savings Account

Before your baby is born, open a separate savings account for all the newborn items you will need and any emergency expenses that might arise when you are off work.

During the nine months leading up to delivery, start taking the salary percentage you’ll be losing come parental leave (45% if it isn’t topped-up) and divide it between debt repayment and savings.

This way, you’ll be getting yourself in better financial shape and practicing living off the income you will have when your maternity leave begins.

Read: Smart Money Ideas For Women At Every Age

Make Some Extra Money On The Side

If you’re self-employed, or don’t qualify for EI, you can make as much money as you want during your parental leave, without a penalty.

So if you’re not eligible for Employment Insurance, go ahead and get paid for some freelance work or a start a side hustle.

Even new parents receiving EI benefits can still make some money on the side so long as the income earned falls below the government threshold. So there’s nothing to prevent you from starting a new business or refurbishing furniture to sell online – if you can keep your eyes open long enough!

Case in point, I created this website while on maternity leave with my baby daughter.

Check out the maternity collection for baby bump support at BellyBandit.com

Scale Back On Long-Term Savings

With less income coming in, you may need to ease up on some of your savings and investment goals. Raising a new baby is wonderful but also perhaps the most expensive stage of your entire life.

So, that may mean waiting a year to start a Tax Free Savings Account (TFSA) or reducing the amount you contribute monthly to your Registered Retirement Savings Plan (RRSP).

Read: Investment Ideas For Low And Middle Income Earners

5) Create A New Baby Budget

Many new parents delight in planning the more enjoyable aspects of becoming parents – nursery decor, adorable clothing, choosing the perfect stroller.

One of the biggest shocks can come though, not from how many extra loads of laundry you’ll be doing, but from the reduced dollar amount in your bank account.

Whether or not your employer provides top-up benefits, creating a budget is essential because many of your expenses will change. You’ll be saving money on work expenses (gas, parking) but baby expenses will arise. Plus you will be budgeting with as much as 45% less income.

Read How To Budget For A New Baby – First Year Checklist for a detailed guide about saving money on all your new baby essentials.

To help you create a budget plan for your baby, we’ve created this free Baby Budget Spreadsheet & Baby Item Checklist. Fill-in the quick form below and you’ll immediately receive both in your inbox. We don’t spam!

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6) Pay-Off Debt

If you have any debts, outside of your mortgage, work towards paying them off now. Put as much money as you can afford into paying down the balance, and start with the debt with the highest interest rate (ie. credit cards).

Read: Smart Ways To Save Money On Back To School Expenses

7) Register Your Child’s Birth

After your child is born, go online and apply for all the government documentation your new Canadian citizen will need.

1. Apply for a birth certificate and register your child’s birth. You must register in the province or territory of birth. First Nations parents must also register the birth with their Band Membership. You can also apply for a birth certificate in your province or territory.
2. Apply for your child’s Social Insurance Number (SIN). 
3. Apply for a health card for your child. Contact your provincial or territorial health authority to apply for your child’s health card.

Get 10% off your entire order of organic baby items at Finn & Emma with my code AFFILIATE10.

8) Open A Registered Education Savings Plan

According to the Government of Canada, the average cost of four years of post-secondary education is $66,000. This amount includes tuition, living expenses, travel, and textbook and computer costs.

Putting aside some money each year will help take the bite out of making those first year tuition payments.

To make the most of your savings, consider opening a Registered Education Savings Plan (RESP) soon after your child is born.

The Canada Education Savings Grant is money the federal government adds to your child’s RESP.

With the Canada Education Savings Grant (CESG), you can receive a government grant of 20% of your RESP contributions – to a maximum of $500 per year and a lifetime limit of $7,200. This grant is available until your child turns 17.

If your family has a lower income, you can get up to $2000 from the Canada Learning Bond without having to put in any of your own money.

Read: 11 Unique Baby Shower Gifts Under $100

9) Look Into Child Care Options

Child care in Canada is hard to come by.

Finding Quality Child Care says, ” there are only enough regulated child care spaces (including part-day preschool and nursery school) to cover about 20% of 0-12-year-olds.”

Reasons Parents Can’t Find Child Care:

• It’s expensive and many parents can’t afford the fees.
• There is not a lot of child care available during irregular hours or for parents needing part-time care.
• It is difficult to find quality child care.

Types of child care

Every province and territory is responsible for monitoring and licensing regulated child care services. Regulated child care services include centre-based child care, regulated home care, school-aged child care (before-and-after school care), and preschools.

Regulated spaces make-up only 24.9% of the spots for children aged 0-12 years old in Canada. Therefore, the majority of child care is provided through unregulated arrangements, either in a home daycare or in your home (a nanny or a babysitter).

10) Update Your Insurance & Will

Review your employer’s health insurance plan. Add your child to the plan if possible.

Review your insurance coverage. Consider if you need more life insurance to help your family in case something happens to you.

Update your tax forms with your employer. Have one parent claim the child amount or the amount for an eligible dependent on your income tax forms.

Claim the child care expenses deduction on your income tax form at tax time.

Write or update your will. Review your estate plan and add your child as a beneficiary in your will. You should also consider who you’d want to raise your child if something were to happen to you and your partner. Designate a potential guardian in your will so your wishes are clear.

Read our article, Best Baby Strollers On A Budget, for a list of 6 great strollers for $500 or less.

Prepare Your Finances For A New Baby – Conclusion

Congratulations on the arrival, or soon-to-be appearance, of your new baby. There is certainly a lot to plan for but you should now feel ready to tackle these 10 financial tasks.

I hope you found this financial guide for new parents in Canada helpful. If so, please share!

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