Five Money Tips for New Parents
When my daughter was born, she brought joy to our family. I wish I could say that conceiving her was easy, but the reality is we had trouble conceiving and had to seek help. While the cost of in vitro fertilization (IVF) is a whole different story, my wife and I quickly learned that as new parents, we need to manage our money differently.
We knew childcare was going to be expensive, and despite our planning, we were sometimes caught unprepared. Luckily, we were able to handle any situation that came our way. But there’s no denying that our budget took a hit and we were quite stressed at times. Whether you’re new parents or just found out he’s getting pregnant, here are 5 affordable tips to help you stay on track.
Check Your Budget As Soon As Possible
As soon as you know you’re expecting a baby, you need to revise your budget. The first thing you need to do is calculate how much you will earn if one of you is on maternity leave. While you may be eligible for unemployment insurance benefits, many couples experience a significant drop in income while caring for a child. Now that you have estimated how much you will make, you can see what you will make. Many of your expenses won’t change, but now you need to budget for things like diapers, clothes, baby supplies, and more. It’s also a good idea to factor in childcare costs, as you’ll eventually have to pay for them.
A drop in your income combined with an increase in expenses is a recipe for disaster, so it’s good that you’re making adjustments now. You may need to save on non-essential expenses like entertainment and food. It’s going to be a challenge, but it’s a sacrifice you have to make to keep your budget in balance.
Be Creative When Saving
Be creative when saving Many new parents want the best for their children. This can be branded strollers, the most expensive cot, any toy and more. That’s certainly a good thing, but if you want to go this route, you have to spend a lot of money. Find better ways to save.
An easy way to cut your costs is to search for baby supplies on Kijiji or Craigslist. Some people would never consider used items for their kids, but as a parent I can tell you it’s worth it. Babies grow fast; Very often the things you find are lightly used or like new. You can easily find a garment that is 75% cheaper than retail price. Expensive items like strollers, cribs and high chairs can also be greatly discounted as parents stop using them when their child outgrows them.
Another way to save is to choose wisely where and how you shop. PC Optimum is the grocery store loyalty program owned by Loblaws Gas Stations, Shoppers Drug Mart and Esso/Mobil. When you combine this with a PC Financial credit card, you’ll start accumulating points quickly. Use these points to get discounts on groceries and goods. You can take this one step further and join PC Optimum Insiders for even more points and free grocery pickups. Read my PC Optimum Insiders review and find out how it saves me a lot.
Set Up An Enrolled Education Savings Plan
If your budget allows, setting up a Registered Education Savings Plan (RESP) right after the birth can be incredibly beneficial. An RESP is a registered account intended to be used for the future costs of your child’s education. While you won’t receive a tax credit from deposits, if the funds are withdrawn in the future, they will be taxed on your child’s behalf. Since your child likely has an educational loan available and has a low income, they probably don’t pay much, if any, tax.
The other major benefit of a PRAE is that the government increases your contributions by 20% thanks to the Canadian Education Savings Grant (CESG). There is an annual matching limit of $500, which means if you donate $2,500 each year, you get full prize. There’s a lifetime CESG limit of $2,500, so pay if you’re a regular contributor. It’s also worth noting that low-income families may qualify for an even higher match.
Update Your Will And Benefits
Update Your Will and Benefits When your child arrives, you as a new parent will likely feel overwhelmed. There are so many emotions out there and lack of sleep will be something to deal with. Despite all of this, you need to stay focused and make sure your will and benefits are up to date.
Your employee health insurance benefits usually have a special window where you can add your child’s name without losing coverage. For example, you may have 30 days from the date of birth to add them. As long as you do it within that time frame, you probably won’t have a problem claiming benefits for them. If you miss this window, your child will still be covered, but you may need to complete additional paperwork before they are officially added to your benefit plan.
As for your will, many new parents probably haven’t made a will yet. On those rare occasions when the unthinkable happens, you should take care of it as soon as possible. Wills can now be drafted through a lawyer or even online. It takes less than an hour and you have the peace of mind that your last wishes will be respected.
Take Out Life Insurance
If you don’t already have life insurance, now is the time to get it. I can’t stress this enough because with a child you depend on your income. If you die suddenly, your surviving family members may struggle with business finances to survive. With term life insurance, your family is well protected.
Provided you’re relatively healthy, health insurance isn’t even that expensive. The amount you pay each month depends on your age, gender, medical condition and the amount of insurance you want. In general, the amount you want should cover funeral expenses, the balance of your mortgage, and future education costs. Some parents even choose a policy that leaves enough money until their surviving children are independent. Nobody wants to collect life insurance, but if they do, they’re happy that the money is there.