Preparing for baby's first expenses

How much does it really cost to raise a child?

Everyone knows that raising a child comes with a price tag. But how much should you actually expect to spend?

Based on Statistics Canada (This hyperlink will open in a new tab) data, estimates from the Department of Finance Canada (This hyperlink will open in a new tab) show that the cost of raising a child can add up to a substantial amount over time.

• Depending on household income, raising a child aged 0 to 5 costs between $15,200 and $26,300 a year.
• For a two-parent family with two children and a household income of $104,000 to $170,200, the average cost is about $18,900 per year for each child aged 0 to 5.
• Over time, those costs add up. For the same family, total spending reaches approximately $361,500 per child by age 17.

Understand the financial impact of parental leave

Parental leave gives you time to focus on your growing family. Thanks to benefits that replace part of their income, parents can settle into their new role with greater financial peace of mind. Even so. For many families, disposable income still decreases during this period.

Calculate the difference between your regular income and the amount you'll receive while on leave. This will help you see whether your budget is still on track.

Here are a few questions to help you assess the situation:

• How long does each parent plan to be on leave?
• What income will you have during that time?
• Are any of your regular expenses likely to decrease?
• Will you still have some financial breathing room with your current budget?

Parental benefits: A financial cushion during leave

During your parental leave, you can apply for benefits that replace a portion of your income through one of the following programs:

• Employment Insurance (This hyperlink will open in a new tab)
• The Quebec Parental Insurance Plan (QPIP) (This hyperlink will open in a new tab), if you live in Quebec

Check your eligibility as soon as your plans to start a family take shape. Your employer or HR department can also help guide you through the application process.

Government benefits: Extra support for your growing family

Once the baby arrives, you may also receive certain allowances to help cover some of the expenses related to their well-being and education.

Some of the best-known programs include:

• Canada Child Benefit (This hyperlink will open in a new tab)
• Provincial benefits such as the family allowance in Quebec (This hyperlink will open in a new tab)

Support while you’re studying

If you're in school when your baby arrives, explore the support programs available to help you juggle family responsibilities and your studies.

Separating the essentials from the nice-to-haves

Let's face it: it's easy to be tempted by cute outfits and all the gadgets that claim to make parenting easier. And with so many online checklists, it can feel like you need to have everything ready before the birth. The truth is, you only need a handful of essentials to get started.

The key is knowing what to prioritize

Before you add something to your cart, ask yourself one simple question: Will it actually be useful during the first few months? Often, that's all it takes to tell the difference between a real need and an impulse buy.

Start with the basics:

• A car seat that meets current safety standards
• A crib, bassinet or safe sleep space
• Sleepers and a few basic clothing items
• Diapers
• Baby care products
• A stroller
• The feeding essentials that fit your situation

Everything else can wait. Within a few weeks, you'll have a much clearer idea of what you actually need. After all, many popular baby items are used only occasionally despite the hype.

Baby's ongoing monthly expenses

When you're getting ready for a baby, it's easy to focus on the major purchases. But over time, it's often the everyday costs that make the biggest difference to your budget.

As the weeks pass, new expenses gradually become part of your routine:

• Diapers
• Personal care products
• Food
• Clothes you'll need to replace regularly (babies grow fast!)
• Certain medications or healthcare costs
• Extra transportation expenses

None of these costs are especially major on their own. Together, these day-to-day costs become a new part of your budget to plan for.

Plan ahead for child care costs

Returning to work may feel far away. But if child care is part of your plan, it's worth looking into your options early. In many areas, waiting lists can be lengthy, and parents often need to start securing a daycare spot (This hyperlink will open in a new tab) well before their parental leave ends.

The cost varies depending on whether you’re looking into subsidized or unsubsidized child care services. Whichever option you choose, remember to factor these costs into your future budget.

A habit that can make a difference

Make a point of tracking the new expenses that come with everyday life as a parent. After a few weeks, you'll have a clearer understanding of your actual costs and can adjust your budget as needed.

Expect the unexpected

Parenthood comes with plenty of surprises. An unplanned purchase, an extra appointment, equipment that's reached the end of its life... You can’t plan for everything.

That's why building some flexibility into your finances is just as important as creating a solid budget. An emergency fund can help you handle unexpected costs without throwing your finances off course.

Key takeaways

Leave yourself some wiggle room in your budget rather than trying to account for every expense down to the last dollar.

Protect your family’s future

As you plan for day-to-day expenses, take the time to look into family insurance solutions and the coverage options available for your child. This will help you choose the coverage that's right for you and your child.

Saving money made simple

Budgeting doesn't mean saying no to everything. It's about making thoughtful choices.

A few easy ways to keep costs down:

• Accept borrowed or hand-me-down items when they're safe and in good condition. After all, a sleeper worn for only a few weeks or equipment used for just a few months can often be reused.
• Consider buying used when appropriate.
• Shop around before making larger purchases.
• Hold off on buying certain accessories until you know whether you'll actually need them.

A word of caution!

Before using safety-related items such as car seats, be sure to check their condition, history and any current safety recommendations.

Is it too early to start saving now?

The prom is still a long way off, right? But starting to think about post-secondary education while your child is young can be worthwhile.

A Registered Education Savings Plan (RESP) lets you save for future education costs while taking advantage of government grants.

No rush, though. In the first few months, many families choose to focus on day-to-day expenses and building a solid financial foundation. If you can afford it, setting aside a small amount on a regular basis is a good way to get started. You can always increase it as your situation evolves.

Look beyond the first year

By the time your baby is three months, six months or a year old, your financial situation will likely look different. Going back to work may change your income. As your child grows, their needs will change, and some expenses will be replaced by new ones, such as child care costs.

Rather than waiting for your budget to fall out of step with your reality, revisit it whenever a major change occurs:

• Returning to work
• Starting child care
• A change in income
• A significant new expense
• A change in your savings goals

From there, an annual review is usually all it takes to stay on track.

A realistic budget is the best place to start

Preparing for major expenses can help you approach your baby's arrival with greater confidence and less financial stress. A budget is meant to evolve. As your family's income, needs and plans change, so should your budget.

As your baby grows and new routines become second nature, the focus will gradually shift from the numbers to the moments you'll cherish.