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MONEY MILESTONES: In an ongoing series, the Financial Post explores personal finance questions tied to life’s big milestones, from getting married to retirement.
Parents say having children is among the very best experiences of their lives, but navigating their offspring’s path from infancy to adulthood will put a serious dent in their finances.
“Don’t kid yourself about the cost of kids,” said Justine Zavitz, vice-president at Zavitz Insurance & Wealth in London, Ont. “You can be a very frugal person, but kids are expensive and you’re going to be allocating more and more of your monthly budget to them than to yourself.”
As interest rates continue to rise, it’s not surprising that many parents are feeling the financial pinch of parenting. According to a survey by PolicyMe Corp., a Toronto-based digital life insurance firm, 70 per cent of parents say Canada is becoming unaffordable, with 47 per cent noting that food is the most expensive and/or challenging child-related spending expense to manage, followed by clothing, shoes and other accessories at 43 per cent.
The financial impacts come even sooner if couples require fertility assistance through medical procedures such as in vitro fertilization (IVF). One IVF cycle can cost from $7,750 to $12,250 plus additional medication costs, and multiple cycles are often required.
“My wife and I struggled to have a child and went through IVF and no one talks about how hard that can be both emotionally and financially,” said Toronto-based personal finance expert Barry Choi, whose IVF journey totaled $20,000.
During the group consultation when the doctor outlined the procedure’s costs, he recalls that some people broke down in tears because they knew they couldn’t afford it. In some provinces, however, some may be eligible for one cycle of government-funded IVF.
My wife and I struggled to have a child and went through IVF and no one talks about how hard that can be both emotionally and financially
Although there are no definitive numbers on the cost of raising kids in Canada, experts have conservatively estimated it to range from $10,000 to $15,000 a year. If you’re considering private school, bank on another $4,000 to $26,000 per school year.
But Choi said it’s best to consult with experienced family and friends to get a proper handle on what having a child will cost you.
“Everything you read online is subjective, but when you talk to a parent who has dealt with it recently, that’s where you get the real-life information,” he said.
In taking the plunge into parenthood, doing plenty of pre-planning is key. Choi said he and his wife created a budget for the first year, knowing there would be a reduction in income because of maternity/paternity leave. Maternity and paternity benefits allow you to get only 55 per cent of your income up to maximum of $638 a week, unless your company tops them up.
“The nice thing is that we went on that budget even before our daughter was born to feel it out before things got real,” Choi said.
Don’t forget to create some cushioning for some fun stuff either, he adds, so that stay-at-home parents don’t feel guilty spending on occasion even if they’re not “working.”
Zavitz wishes she had done more research on one-off, child-related expenses, such as baby and toddler accessories, early on instead of being backed into finding the fastest — and often more expensive — solution.
We went on that budget even before our daughter was born to feel it out before things got real
“By doing more backward planning and anticipating future needs, you can give yourself time to shop for the best deals,” she said.
Zavitz points to options such as Facebook Marketplace and online community hubs where parents often offload no-longer-needed children’s items at a fraction of their retail price — or for free.
“That’s where I’m buying a lot of my kids’ sporting equipment now, which can save so much,” she said.
Experts also point out that new parents should remember that child-care costs won’t necessarily go down as children get older. After those early years, there are before- and after-school care costs, babysitters, summer camps and extracurricular activities, plus post-secondary education expenses.
Zavitz said government initiatives such as the Canada Child Benefit (CCB) can help offset some of these costs for eligible parents. In 2022, the CCB equals a maximum of $6,997 per year for children until they are five years old, and $5,903 for those six to 17.
For parents who can afford it, she’s also a big fan of the registered education savings plan (RESP) as a tax-efficient way to save for a child’s education. The federal government will add 20 per cent on top of your annual contribution of up to $2,500, though the lifetime contribution limit is $50,000 per beneficiary.
“You can catch up on past grants if you can’t afford it right away, but only to a certain extent,” she said. “It’s also a nice present from grandparents to put money into RESPs.”
Zavitz also advises parents to ensure they put children on their benefit plans within 30 days of their birth to avoid issues around unforeseen medical expenses, and to add children to their wills as soon as possible.
“The trouble is, you don’t fully recognize the pull on the heartstrings until you do meet your kids,” she said. “You’re going to want to give them everything you can to make their life wonderful and that’s going to cost you.”