Starting a Family? 7 Crucial Tips and Resources To Plan Your Finances

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A couple of days ago, I had the pleasure to make a small presentation at my best friend’s baby shower. The idea was to provide current and future young mothers with practical tips to manage their finances in response to the biggest event in their life: Having a baby. I made a point of making everyone contribute and share their experience. After a series of very interesting and insightful exchanges, I decided to share the fruit of our conversation in this blog post, so it could help you in your own family budget. Though some of the examples given apply specifically to Canada (where I presently live), these tips are applicable everywhere.

1. Examine your current financial situation

Take a screenshot of your financial health today in order to have a better idea of your starting point. What are your current assets? Do you have any savings, retirement plan, brokerage account, real estate investment? On the other hand you should also determine your total liabilities. What are the balances on your credit cards, car loan, student loan, mortgage, etc? Having a clear idea of your net worth through sound financial planning is the first step towards your new budget.

TIP 1: Make sure the maternity benefits you will be entitled to are enough to cover your upcoming expenses. You may have to adjust your lifestyle and consumption habits going forward. 

TIP 2: In addition to a monthly or annual budget, you should also project your long-term expenses over the next 25 years.

2. List and plan your first major expenses

Once you’ve received the big news about your pregnancy, the next step when making your new budget is to list all the major expenses you will have to incur. For example, will you be buying or moving into a bigger home? will you need to buy a car? How much will cost the first baby clothes, furniture and accessories? Will you be sharing the costs with a partner? Indeed, budgeting as a couple vs individually implies very different cost allocations.

TIP 1: In Quebec, it is strongly advised to register for day care as soon as you know you are expecting. Indeed, waiting lists for subsidized and affordable day care centers can be quite long. 

TIP 2: Don’t go on a shopping spree while you are pregnant. Instead, wait until your baby shower to receive plenty of useful gifts that can substantially lower your expenses. That way, you can focus on the most expensive items like pushchairs or car seats. 

3. Budgeting for your kid(s): Age 0 – 5

As your child starts growing up, your monthly budget should include all the expenses mentioned above, plus an allocated amount for daycare services, babysitting, food and leisure. At this stage, daycare and sitting services are likely to be your biggest expenses. Also, as you run your budget periodically, try to set an expense cap that you do not want to breach. Baby-related budgets can vary widely from $400 to $2,000 a month, depending on income. So a good way to set your limit would be as a percentage of your monthly net income.

TIP 1: In Quebec, the daycare subsidy that provided a seven-dollar flat fee for everyone will now be adjusted as a function of salary. So the higher your family income is, the higher daycare costs you will have to incur. Some family will end up paying up to $60 per day for public and subsidized day cares. So don’t be taken by surprise, and make sure to have a good estimation of the amount you will have to pay under the new regulation. 

TIP 2: Sitting services can quickly add up to your budget, so you may consider cheaper options like peer-to-peer services or community groups. Your family and social network would be a good option. 

4. Budgeting for your kid(s): Age 6 – 25

The older your child gets the more expensive it will become. Indeed, in addition to the items listed above, you will have to finance your kid’s education.

TIP : Think about the number of children you wish to have, and factor that important detail in your budget. If you can avoid your children to get in debt in order to fund their education or other needs, it would be the ideal scenario.

5. Start financing your child’s education as early as possible

By age 5, most kids are going to kindergarten. As your child moves up levels, education will become more expensive, and you will have to provide for books, accessories, private instruction, clubs, sports activities, summer camps and trips. A very important item in your budget will also be provision for college or university.

TIP : Make sure to look into Registered Education Savings Plan (RESP) and the Universitas program, that can help you save money faster, tax-free, with government-matched contributions.

6. Know the tax credits you qualify for

In Canada, there are several federal and provincial tax deductions at your disposal. Here is a list of some benefits you may qualify for:

  • Universal child care benefit
  • Canada Child Tax Benefit
  • Goods and services tax/Harmonized sales tax credit (GST/HST)
  • Working income tax benefit (WITB)
  • Child care expenses deduction
  • Support deduction
  • Amount for an eligible dependent
  • Allowable amount of medical expenses for other dependents
  • Tuition, Education, and Textbook tax credits
  • Amounts transferred from your spouse or common-law partner
  • Tax credit for public transit (you and your dependents)
  • Children’s Fitness Tax Credit
  • Universal child care benefit
  • Canada Child Tax Benefit
  • Goods and services tax/Harmonized sales tax credit (GST/HST)
  • Working income tax benefit (WITB)

7. Build a contingency fund for worst-case scenarios and emergencies

Always keep a buffer in your budget for unexpected events. Last-minute trips, personal projects, unemployment or uncovered medical costs, are part of life. So make sure you protect yourself and your loved ones in case something happens.

TIP: Make sure you have a good insurance plan for your family. Paying for routine medical costs should NOT be a source of stress.

Did this help? Your opinion matters. You can rate this article, leave a comment below or share it on social media. Follow Bobbyfinance for more financial tips.

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