Financial Planning for New Parents
When I found out that I was expecting my first baby, I instantly began thinking about how to prepare for this major life change. I Googled the best car seats and strollers available. I purchased baby clothes, bottles, nursery furniture and blankets. I read the book ‘What to Expect When You’re Expecting’. By the end of the pregnancy, my head was spinning with all the dos and don’ts on how to care for a newborn. I am sure that most new parents prepare for their first baby in a similar fashion.
A baby changes everything. In an instant you are not only responsible for yourself but also for another little person who will depend on you entirely. Raising and educating your child can be expensive. It can alter your lifestyle and spending habits as well as disrupt your previous short-term and long-term financial goals. One of the most important considerations is how to financially prepare for this life change. From diapers and childcare costs to dance lessons, sports equipment, and birthday parties, it is essential to plan ahead.
Take these steps to financially prepare for your growing family:
1. Meet with your financial advisor and review your financial plan. If you do not have a financial plan already, it is even more important now to create one.
2. Review your spending and create a household budget. Discuss your income with your partner and understand the impact of EI maternity or parental benefits.
3. Get your estate documents in order. With a baby added to your family, it is a crucial time to draw up a Will, Personal Directive and Power of Attorney. It can be unpleasant to think about, but it will help minimize the impact of an unexpected death.
4. Protect your family with insurance. If you have a group plan at work, review your disability insurance and life insurance coverage. Talk to your advisor to complete a needs analysis to determine if you have enough coverage for your growing family.
5. Build an emergency fund. Unexpected events can change everything in an instant. When your child is home sick, it often means that you or your partner will miss work. Or if your job is impacted by events like COVID-19 and you are working less or get laid off, you may need additional financial support. Easy to access emergency funds are so important to protect your family.
6. Save for your retirement. If you have to choose between saving for your child’s post-secondary education and saving for your retirement, choose your retirement. Your child has more than one way to pay for education such as scholarships, loans, and grants. You cannot make up lost retirement savings.
7. Start saving for post-secondary education. Once you have your baby’s social insurance number, you can open a Registered Education Savings Plan. The federal government adds 20% for annual contributions up to $2,500 per child. If your family has a lower income, you can get up to $2,000 from the Canada Learning Bond without putting any of your own money in.
8. Add your child to your work group benefit plan for your health benefits and life insurance.
Delta has over 12 years of experience working in the financial industry. She began her journey with Financial Services Group in December 2010, and became a full-time team member at FSG in June of 2014. She is currently working towards her Qualified Associate Financial Planner designation.