Financial planning tips for new parents

Financial planning tips for new parents
Financial planning tips for new parents

The arrival of a child requires many adaptations and many changes. However, there is one aspect of their lives that new parents do not always make the necessary changes: their finances. When a new baby arrives, we should review and adapt our decisions, objectives, and priorities of a financial nature. This article describes Financial planning tips for new parents

Before the baby arrives

It is wise to get your finances in order before your child is born. But if you have not managed to make some of these changes before becoming a parent. It’s never too late to do it!

Organize your finances. 

Set up automatic or online payment for your current bills. Establish a savings plan that automatically deducts a certain amount from your paycheck and deposits it into a savings account. Organize your financial documents physically at home. You may not have time to do it once the baby is there.

Make sure you have adequate life insurance and disability insurance. 

 Having insurance is the best way to make sure that your family would not be in a difficult financial situation should you be unhappy. Most specialists recommend that you buy life insurance with a premium of 10 years’ pay. It is also a good idea to purchase disability insurance that will provide income for your family if you have an accident or illness that leaves you disabled.

Read the policies on parental leave carefully. 

Make sure you understand your benefits, including paid parental leave and short-term disability eligibility, and know if you will be using your vacation or sick days. These benefits and the decisions you make can have significant financial repercussions.

Review your health insurance.  

Is your current plan suitable for a young family? If you need to make changes, find out when and how to do this with Human Resources (HR).

Plan all expenses related to childcare.  

If you keep your child, this expense will probably be the highest of the new expenses that will come with the baby. Explore the opportunities available to you immediately, and incorporate that expense into your budget. 

It is wise to get your finances in order before your child is born. But if you have not managed to make some of these changes before becoming a parent, it’s never too late to do it!

Pay off the most debts before the baby arrives.  

This will give you more money for the expenses your baby will incur and save for your child’s education and retirement.

If you and your spouse plan to take unpaid or reduced-wage leave, start saving now. 

If one of you leaves his job, start as soon as possible to live on a single salary. By putting one of your paychecks aside, you’ll be able to increase your savings and get used to living on an income.

Include in your family budget all new upcoming expenses.  

Many new parents are horrified by the cost of basic necessities such as diapers and formula. Diapers alone can add $ 100 to your monthly expenses. It is important to plan how you will cope with these new expenses.

Consider signing up for a wholesale club. 

Often, the best way to save on products you buy in large quantities, such as diapers, is to become a member of a buying club, such as Costco, BJ’s Wholesale Club or Sam’s Club. Before the baby arrives, you could go to this kind of store and compare the prices with those of regular retail stores and online stores to get an idea of where to find the best deals.

Sign up for a baby gift registry. 

If you know that you need some items that will cut your budget, sign up for one of the many baby gift registries offered by traditional retail stores (such as Walmart and Target) and online stores (such as Amazon). Let your friends know to make sure you receive items you really need and avoid duplicate gifts or things you do not need.

If you have not set up your accounts for automatic payments, pay all your bills a week or two before the expected date of delivery.  The first weeks after the birth of a baby are not easy. By paying your bills in advance you will not forget them and have to pay late fees.

 

  After the arrival of the baby

Look for ways to limit baby expenses. 

To reduce expenses, you can buy used. Visit second-hand stores or second-hand stores that give a second life to clothes, accessories, and toys still in good condition. Do not disdain the second-hand clothes you want to give you or the garage sales. These are great ways to save money on items that are only used for a short time. (For safety reasons, however, experts recommend buying a new crib and a car seat.) Also, be aware that babies do not need much, especially when it comes to toys. and the decoration of their room.

Buy toys, clothes, and accessories as and when needed.

You do not know how big your baby will be in a few months, so it’s best to buy clothes when you need them. The same goes for toys and other accessories. You can borrow big things from friends, like a stroller or a swing, before you start spending. But before using these accessories.  Some stroller models have been removed from the market for safety reasons. 

Add the child to your health insurance plan.  

You can do it from birth. Your baby will need to see the doctor at least six times in their first year, and there will be annual follow-up appointments thereafter. If you need additional coverage, there is usually a period in the fall when you can change your health insurance plan.

Start saving for the university.  

University studies of your little one may seem like a long way off, but most people need all this time to accumulate savings. See what savings opportunities for university education, such as Registered Education Savings Plans (RESPs). Even if you can only contribute small amounts to the education fund, in the end you will have accumulated a good amount. You can also ask your family members to contribute to the savings for your child’s post-secondary education rather than giving him gifts on his birthday or during the holiday season.

Do not neglect your retirement savings plan.  

The education fund is important, of course, but you should not feed it at the expense of your retirement. Your child will still be able to obtain a loan to continue his university studies, but you will not be able to do the same to earn income once you retire. If you have to choose between the two, save for retirement.

Apply for a Social Insurance Number (SIN) for your child while you are in the hospital. 

You will need it to take advantage of certain tax breaks and deductions. 

Apply for a Social Insurance Number (SIN) for your child while you are in the hospital. You will need it to take advantage of certain tax breaks and deductions.

Make or update your will. 

If you do not have a will, remedy the situation as soon as possible. Be sure to mention by name a legal guardian for your child. If something should happen to you, it is this person who will have custody of it. Writing a will is rather simple. 

Check who the beneficiaries are on your legal and financial documents. 

Make sure your child’s name is listed as a beneficiary as much as possible.

Take advantage of programs that pay fewer taxes.

Parents have the right to attractive tax breaks, including reducing their taxable income by $ 8,000 for each child under the age of seven and $ 5,000 for children aged 7 to 16. The website of the Canada Revenue Agency (CRA) can enlighten you as to the costs of eligible childcare deduction. The Children’s Fitness Tax Credit is another initiative that allows you to claim a refund of up to $ 1,000 per child (under age 16) ineligible expenses for physical activity programs, including courses and team sports.    

Finally, accept that it is often impossible to do everything. For many people, it is simply not realistic to fund the bottom of son’s studies and save for a comfortable retirement while keeping the lifestyle they had before the kids. Expect to adapt financially today and in the years to come. This adaptation is an integral part of learning the role of parent

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