Planning a Family – What to Save for Right Now

The decision to move forward with your plans to start a family is a joyous one, but it can also lead to increased stress, especially if your financial house has not been “child-proofed”. Considering that, on average, the estimated cost of raising a child now exceeds $300,000, there’s little margin for error for most young families that have other important financial goals to achieve.  But there’s no reason why you should get caught off guard or in a cash-crunch, as long as you plan ahead. The following family planning checklist contains what is deemed by most new parents as being essential concerns when preparing for a new arrival, but it is by no means exhaustive:

·    What is the cost for physically baby-proofing everything? You need to take a complete inventory of the requirements needed for you house, your yard, and your cars and bring them up to safe baby standards. If you’re unsure what these standards are, you may want to enlist the help of a Professional Baby Proofing Service.

·    Have you budgeted for ongoing infant supplies? Your newborn will require a constant stream of supplies. Often a warehouse-club type of store has great deals on bulk items. And becoming members of online parenting forums in your area is a great way to learn about local deals and coupon hubs.

·    Is your utility use as cost-effective as it could be? Expect an increase in your utility bills - you’ll be doing several extra loads of laundry a week, and possibly washing up to 20 bottles per day.

·    Are your benefits up to snuff? Some workplace benefits cover the cost of private hospital rooms after childbirth, some only cover a portion, and some none at all; make sure you are familiar with exactly what your benefits cover and how they match up with your birthing plan. Even though Universal Healthcare should cover the basics of labour and delivery, you might be out of pocket for expenses outside the ‘standard birthing plan’, or possibly for prescription medication.

·    What are your childcare needs? If you’re both going to be working, the average child care costs can run as high as $1700 a month (depending on your city and province, Quebec generally tops the list as most affordable), which can rival your mortgage.  Have you looked into alternatives such as employer daycare, nanny-sharing, or reducing work hours?

·    Will you require Parental Leave from work? What does your employer provide in terms of paid Parental Leave? Many employment contracts are set up to encourage employees to return to work before one full year of Parental Leave. Beyond the legalities, can you afford the time off? You will need some savings to offset the reduction in income. Consider too, that if you have a job that requires you to have a regular customer or client base, they may go elsewhere during your leave, and it may take a while to build your base back up.

·    Are your estate papers in order? You need a will that includes guardianship arrangements.

·     Do you have adequate life insurance? You need a life insurance plan that will fully cover your family’s needs – enough to provide for a surviving parent and child, payoff debt, and fund a post-secondary education. You don’t want to wait until after the baby has arrived to secure proper life insurance coverage.

·    Have you paid down your debt? It’s tough to cover the additional expenses of a new family while still paying costly interest charges. Debt elimination should be a priority before the baby arrives.

On the plus side, you will earn yourself a number of possible new tax deductions, and at least a monthly Universal Child Care Benefit; and depending on your household income, you could receive greater monetary benefits from the government. It is worthwhile to check with a tax professional to determine what tax savings you might be able to realize once your child is born, and to ensure that you are receiving the proper benefits.

A Family Emergency Fund Should Be Your Top Savings Priority

When considering all of these new family essentials, it’s easy to see how a family’s budget can increase by over $1,000 a month, without including anything unexpected, like a medical emergency.  If you’re planning to start a family you need to determine the incremental increase in your budget; and, even if you find that you will have sufficient income to cover the increase, it is critically important to build up your emergency fund. For a minimum benchmark, your cash reserve should equal 12 months of living expenses, based on your new family expenses.