Baby budgets a balancing act
Saving key when living without an income on parental leave
What is the cost of your sanity?
It’s a question that Rebecca Efrat has asked herself daily since going on maternity leave last May. The midtown mother finds herself torn between the daily desire to leave the house with her daughter Zelda to avoid going stir-crazy, and the financial reality that most mommy and baby activities cost money.
“In this crappy weather, we’re always at an indoor place like the mall or Starbucks and, usually, you end up buying something,” Efrat said. “This is why I have made the effort to be more resourceful in trying to find free classes and activities, like storytime at the library.”
While Efrat received a whole wardrobe and slew of toys for Zelda at her baby shower and as hand-medowns, now, at 8 months old, her daughter has outgrown many of those items.
“Between formula, new baby clothes and activities, there is always crap kids need and that crap costs money,” Efrat said. “Add daycare costs to that, and we have been asking ourselves if we can really afford to have more than one kid.”
Similar to Efrat, Rachael Brownell, another mid- town mother, has also felt the cash crunch of her household income being reduced since starting maternity leave last October. Her 3-month-old son, Logan, is wearing 9-month sleepers, which has caused her to spend a lot more money on baby clothes than she anticipated.
She’s also in the market for a new stroller, since the original stroller she purchased isn’t holding up in winter.
“I’m living off my credit card way more than I’d like to,” adds Brownell, who made saving a priority when working.
“While we did want to travel on my maternity leave, we won’t be taking a family vacation because we need to save up for daycare.”
Considering basic maternity benefits across provinces pay up to 55 per cent of one’s average yearly insurable earnings up to a maximum of $51,300 (except for Quebec, which has its own program), it’s no surprise that many parents struggle with a reduced household income.
Biological mothers are entitled to receive these weekly benefits on an initial 17-week maternity leave, which begins after a two-week waiting period followed by 15 weeks of benefit payments. Both biological and adoptive parents are entitled to up to 35 weeks for parental leave, which gives a couple a maximum combined leave of 52 weeks.
Be wary of thinking your financial situation will improve once paternity leave is over, says Sandi Martin, an Ontario-based financial planner.
“If you think, ‘When I go back to work I’ll have so much more money,’ you don’t realize what your time is worth,” says Martin. “All of sudden with less time on your hands to make lunches and clean, you find that in addition to daycare, you are buying lunch and hiring help to get things done.”
In theory, a life event like having a baby should be the “kick in the pants” couples need to start re-evaluating their financial reality longterm, says Martin, but in reality it’s a different story.
“Being a new parent is a special time in your life and it’s a fine line between the choices you make emotionally and those that are financially optimal,” adds Martin. “You can’t be ruthless about it; it’s a balance . . . but at some point if you can’t learn to live on less, you will paint yourself into a corner.”
To find the balance between enjoying your maternity leave and investing in your baby’s development without breaking the bank, here’s what experts and fellow mothers suggest: Don’t neglect the big picture “When starting a new family, it’s easy to put essentials like retirement savings and life insurance on the back burner,” says Amy Dietz, a Torontobased financial adviser. While saving for daycare is an immediate financial goal, she also suggests consulting an adviser to ensure you have adequate life insurance and a valid will. Check out city-run programs While a private baby music class can cost more than $200 for a nine-week session, the City of Toronto offers similar baby music classes for $40.
The city also offers Strollerfit, yoga and other types of post-natal fitness classes you can attend with your little one at a reduced cost. Check out efun.toronto.ca or your local library for details.
If you are looking for an intro to parenthood class, Toronto Public Health offers a free six-week program called “Learning and Living With Baby” at several libraries, which includes music time, speakers and goodies. Call Toronto Public Health at 416-338-7600 to register. Decide where to splurge and save The reality is your baby won’t remember if they attended a private baby class or had a fancy stroller, but you will, says Martin. “If you really are keen to invest in that fancy baby toy or stroller, test it out first, as opposed to finding out it won’t work for you or your baby after you’ve spent the money.”
Meanwhile, smaller ticket items, like baby clothes and toys that get outgrown every month, are potentially something you may want to buy second-hand, adds Efrat. “Babies are going to be using these items for such a short period of time, it’s not worth paying full price.” Take advantage of a Registered Education Savings Plan (RESP) Within an RESP, you don’t pay taxes on the returns of any of the money you invest up to a lifetime maximum of $50,000. You are also eligible for Canadian Education Savings Grants (CESGs), which can amount to a lifetime maximum of $7,200 per child, depending on your income, as well as other government bonds. Learn more about the CESG online.