Five financial steps for new parents
Starting a family can be overwhelming. Be sure to keep these financial steps in mind.
1. A social insurance number (SIN)
To set up registered education savings plan (RESP) in your child’s name and to enable them to work in Canada in the future, they will need a social insurance number. Most provinces offer a Newborn Registration Service that allows you to apply for a SIN along with your child’s birth registration. In British Columbia and Ontario, you can apply for their birth certificate at the same time.
2. Baby comes first – but don’t forget about your other financial goals
Children can be costly: food, childcare and education costs are just some of the expenses you will need to add to your budget. New parents often prioritize those costs over their own financial goals, such as saving for a home, vehicle or vacation. Remember to pay yourself first and benefit from the power of compounding interest (making interest on your already-earned interest) to increase your savings.
Congratulations! Becoming a parent is filled with new joys, new challenges, and yes, new financial goals.
3. Start saving for post-secondary education
With the average full-time Canadian undergraduate student paying annual tuition fees of nearly $6,0001, post-secondary education can be an overwhelming expense. A registered education savings plan (RESP) can help get you closer to that goal. Not only does the money grow tax-free within the plan, but the government chips in with substantial grants. Find out more about RESPs here.
4. Plan to protect your family’s financial security if the unexpected happens
It’s not easy to think about. But you need to help ensure your family will be taken care of financially if you or your partner died unexpectedly. Once you’ve calculated how much you’ll need to pay off your mortgage, help put your child through post-secondary school, and replace your lost income, you can approximate how much life insurance you may need.
Also, consider these basic estate planning steps for new parents:
- Create an inventory of assets and debts and store it in a safe place that only a trusted person can access.
- Review your insurance policies and update beneficiaries if any changes are needed.
- Prepare a will and identify the person you would request to be the child’s guardian.
5. Budgeting for baby
When infants first come home, the financial resources you require to take care of their needs may be basic. But as they grow, previously unconsidered expenses – such as increased health insurance premiums – can surprise parents. That’s why it’s important to start your budget now. Setting up a category just for your child and logging all childcare expenses under it makes it easy to see how much you’re spending.
Getting your finances in order is a great way to manage the challenges of being a new parent. And hey, as they grow up, your child may even pick up a few tips!
1Statistics Canada, University tuition fees, 2014/2015, http://www.statcan.gc.ca/daily-quotidien/140911/dq140911b-eng.htm
By making small lifestyle changes, you could help you and your loved ones financially.
We all know how important it is to take care of our physical health – it keeps us strong and helps ensure we’ll be around for years to come.
But what about looking after our financial health? It’s just as important but often doesn’t receive the attention it deserves.
Even if it seems like you don’t have enough money to invest or buy insurance, it doesn’t take much. If you cut down on extra lattes or meals out, you could set yourself up with a plan for a successful financial future.
Build your personal road map
When it comes to financial security planning, it pays to start small. If you change your spending habits, even just a little bit, the long-term results could be big.
For example, let’s say you made your morning coffee at home instead of picking it up on the way to work. It may not seem like much but the amount you save could be enough for a $500,000 life insurance policy.1
If you cut down on your dining-out expenses by even $20 a week and invested that money, it could grow to almost $37,000 over a 20-year period.2
No matter what you’re saving for, you’re on the road to achieve your future goals.
Other savings ideas:
- Leave the car at home, carpool, use public transit or ride your bike
- Shop around for better auto and home insurance rates
- Install LED light bulbs to reduce energy costs
- Go to the movies on “cheap Tuesdays”
- Clip coupons for groceries or buy in bulk
- Cook at home instead of dining out
With those savings each month, you could:
Invest and watch it grow
A small but regular contribution into something like a tax-free savings account (TFSA) or registered retirement savings plan (RRSP) could grow substantially, if it’s invested wisely and given enough time to grow. Use this money to help fund your retirement or perhaps go on the dream vacation you’ve always wanted.
Protect your family
What would your family do if something happened to you? Insurance is a flexible and cost-effective way to protect yourself and your loved ones financially. It can help pay down your mortgage, cover outstanding debt or fund education or retirement plans.
How we can help
Spending money feels good, but knowing you’re not only protecting yourself and loved ones – but unlocking future potential – feels even better.
A Freedom 55 Financial security advisor can help you build a customized financial security plan to help you achieve your goals.
1Cost of coffee based on $1.70 per cup. Assumes 30 cups a month. This comparison is based on London Life term 10 life insurance, male and female, up to age 45, non-smokers, standard risk, monthly premium payments. Monthly premium depends on your age, amount of coverage and general health information. Life insurance coverage amounts represent the policy’s death benefit. Rates as of December 2015. Term 10 life insurance premiums increase on renewal after 10 years. The example provided is not complete without the London Life illustration, including the cover page, reduced example and product features pages all having the same date. Read each page carefully as they contain important information about the policy.
2Assumes $80 is invested in a balanced mutual fund portfolio on a monthly basis with a six per cent annual rate of return. Rates of return are hypothetical and provided for illustrative purposes only. Mutual funds are not guaranteed; their values change frequently and past performance may not be repeated. Unit values and investment returns will fluctuate.