Having a baby?
It’s time to take control of your finances
Having a baby adds a whole new set of complexities to your everyday life. Your main priorities become things like “How much sleep am I going to get? When is my next shower?” and “How am I going to get time to snuggle with my partner?”
Finances are usually the last things a parent wants to think about. Then that midnight hour hits where you are lying in bed and not wanting to fall asleep because you know if you do, you will just be woken up 45 minutes later to what sounds like a bloodcurdling scream — but in reality was just a whimper or maybe your neighbour’s cat.
Either way, you are awake, staring at the ceiling. Thoughts of the vitamin-filled baby formula you bought, the new crib that converts into a fancy toddler bed and the reusable cloth diapers you gave up on and had to replace with throw-away ones come to mind. Your next thought is an understandably desperate and dramatic one: “How am I ever going to do this?” Your next thought: parental leave pay. The thought after that: “Where are my sleeping pills?”
“Parental leave is an awesome 35-week benefit the government gives us. However, you need to be ready that the benefits of this leave equals 55 per cent of the parent’s average weekly insurable wage, up to a maximum of $485 per week,” says financial fitness coach Chantel Chapman. “This can be a scary number, but equipped with the proper budgeting tools and tips, you can be in full control.”
Jason Heath, a fee-only financial planner at Objective Financial Partners Inc. in Markham, Ont., has lived the parental experience with three children age six, seven and eight.
“Having a child is a good triggering event to talk about a lot of things that will matter over both the short term and the long term,” he says.
“If you don’t already have life insurance, having a baby should be a reason to get some. When you have children, you need to make extra sure they’re provided for financially in the event of the unlikely.”
It’s also a good time to begin thinking of your child’s education.
“Starting an education fund early is a great way to celebrate your child’s birth and can really help with costs down the road,” says May Wong, executive director of the non-profit SmartSAVER. “Get baby a social insurance number and open a registered education savings plan (RESP) to take advantage of available federal and provincial government grants, which will start the plan immediately. In an RESP, your savings will grow tax-free.”
Here are more tips on how to stay in control — and happy.
Set financial goals Do you want to sit on the beach in Hawaii, hit up a new restaurant, or have that special beer always stocked in your refrigerator? In order to achieve success, you need to set goals.
Make a budget The key here is to know how much money is going in and out. Don’t close your eyes when you look at your bank statement. Knowledge is power. Account for your regular expenses, add in your new baby’s expenses and try and leave a little bit out for the fun stuff. If you have to readjust monthly, that’s OK; the main goal here is to have full transparency on your spending. Don’t be too hard on yourself The first year that you have your child can be challenging. If you already have things in place such as retirement savings or investments, it’s OK to put those things in a holding pattern because money is tight.
The key here is to be sure to have a long-term plan to get back on track. Even putting $25 away a month is $300 a year!
Did you know that everyone knows your credit score … except, well, you?
“Having another human life to be responsible for can be overwhelming, so before the baby comes, it’s good to check your credit score. The credit score is a good indicator of your financial health. Knowing where your score stands could eliminate unpleasant surprises if you need to get access to credit in the future or even rent or buy a new home as your family grows,” says Chapman.
HAVING A CHILD IS A GOOD TRIGGERING EVENT TO TALK ABOUT A LOT OF THINGS THAT MATTER OVER BOTH THE SHORT TERM AND THE LONG TERM