Having a baby comes with a lot of decisions! There are major decisions such as the baby’s name, or who you choose as Godparents. Then there are day-to-day decisions such as how you will feed the baby and whether you’ll use cloth or disposable diapers. All of this can result in a major case of decision fatigue. Financial decisions might seem like they can wait. Making smart financial decisions early in your baby’s life can make a world of difference long-term.
Here are some financial decisions you’ll want to consider sooner rather than later:
- Make sure you take advantage of any government benefits you are entitled to. If possible, put some of your child’s Canada Child Benefit into a High-Interest Savings Account. The dollars will add up quickly, and can be saved for major purchases that will come up later. You can figure out how much your Canada Child Benefit will be by using this calculator.
- Consider opening a Registered Education Savings Plan (RESP) for your child. Ask any parent of older children and they’ll tell you that the years go by in a flash, and the cost of post-secondary education can be staggering! An RESP is a long-term savings plan to help people save for a child’s education after high school, to a lifetime maximum of $50,000 with tax-free growth. The Government of Canada chips in with the Canada Education Savings Grant, to help boost your savings. They will contribute 20% of annual contributions for a qualifying beneficiary of an RESP to a maximum of $500 per year, with a lifetime limit of $7,200, regardless of family income. They will also pay an additional amount based on adjusted income.
- Research childcare options well ahead of time. Waitlists for licensed childcare centres can be extremely long. Often you’ll need to get on a waitlist before your child is even born! Futhermore, childcare can be quite expensive, however there are some money-saving options if you plan ahead. The Government of Canada is rolling out an affordable Early Learning and Childcare System with provinces that has seen the price of daycare drop significantly across the country. However, there is still a cost that you will want to factor into your budget. The Government of Ontario offers a tool to help parents find licensed childcare in their community.
- Add a “baby” line to your family budget. There will be lots of expenses coming up over the coming years, and you’ll want to be ready for them.
- Ensure that you have a will, and legal guardians selected for your child. Although it’s not a fun thing to think about, it’s essential that you have a plan for your children if the worst happens.
- Protect your family by ensuring that your life insurance coverage is adequate so that your family can have peace of mind should anything happen to you.
- The Child Disability Benefit is a tax-free benefit for families who care for children with severe and prolonged impairments to mental or physical functions. If your child is eligible for the disability tax credit, you will automatically receive this monthly benefit. If your child qualifies, you will want to discuss the option of a Registered Disability Savings Plan (RDSP) with your financial planner as well. This plan can provide financially for your child when you are no longer able to do so. It allows up to $200,000 in lifetime contributions that can be withdrawn without being included as income in their later years. The Government of Canada also offers a matching grant, the Canada Disability Savings Grant, which pays up to 300% of contributions depending on the beneficiary’s adjusted family net income.
The newborn stage of parenting can be overwhelming; however, parents want to make good decisions for their children. The best way to ensure your children are provided for is to make sure your finances are in order.
Kindred Credit Union cares about the financial well-being of our members. We can make saving your money easier – we’re here to help whatever season of life you’re in. Kindred offers values-centred banking that empowers you to make peace with your money. Book an appointment with a member of our Wealth and Investment Team today to begin the conversation about how you can best plan for your child’s financial future. It pays to plan!
– Tom Anderson
Tom is a Wealth Regional Manager with the Investment Services team at Kindred Credit Union.