What to think about as you start a family
Whether it’s through birth, adoption or surrogacy, deciding to have a child is one of the biggest decisions you’ll ever make. The rewards are undeniable – but so are the costs.
In fact, Canadians will spend more than $350,000 to raise a child from birth to the age of 17 according to a recent estimate from Statistics Canada.[1] That doesn’t include the costs involved if you pursue parenthood through adoption, surrogacy or assisted reproductive technology; that’s particularly relevant if you’re a member of the 2SLGBTQ+ community.
Before you start the journey to parenthood, consider these expenses. Careful planning will help you keep your financial plan on track.
Different pathways to parenthood
Starting a family can look different for many people, and costs will vary depending on the route you choose. Set a budget well in advance of your new arrival, and research the costs involved – particularly if you’re considering methods like IVF, surrogacy or adoption to expand your family.
Depending on your situation, here are some estimated costs.
A financial checklist
Start thinking about the financial aspects of this significant life change – before baby arrives.
▢ Assess your current financial situation.
There’s no way around it – there’s a real cost to starting a family. In fact, the average Canadian family spends between $10,000 and $15,000 annually until a child is 18. Get prepared for this additional expense by reviewing your spending habits and identifying areas where you can cut back or reallocate funds.
If you have outstanding debt, look or ways you can lower, consolidate or pay it off – especially high interest debt like credit card balances.
▢ Build your emergency fund.
Unemployment is stressful, especially when you have a growing family. Make sure you build an emergency fund that covers at least 6 months of expenses to cover gaps in employment, unexpected medical bills or any unforeseen financial challenges.
▢ Factor in childcare costs.
The cost of childcare can vary widely, depending where in Canada you live, but on average, parents paid $7,790 per year for the main full-time child care arrangement for their 0-5 year old child in 2022.[3] Be sure to research the cost of different childcare options (and get on waitlists as soon as possible).
You can also take advantage of federal tax deductions once your child is in childcare. The spouse with a lower income can deduct $8,000 per child from their income taxes when the child is ages 0-6. Between ages 7-15, childcare tax-deduction expenses drop to $5,000 per child per year, but if you have several children, these benefits can add up.
▢ Start saving for your child’s education early.
Planning for a new addition to your family also means thinking about their future. A Registered Education Savings Plan (RESP) is a flexible option that grows tax deferred and holds a variety of investments or just cash – and allows anyone (like grandparents, extended family or friends) to contribute as well.
And you can receive grants and incentives like the Canada Education Savings Grant which adds 20% of your annual RESP contributions up to an annual maximum contribution of $2,500 or $500 in CESG grant funds.
▢ Purchase or update insurance policies.
Reviewing your insurance needs is one of the most important things you can do as a new parent to protect your growing family. Consider purchasing life insurance or update your existing life insurance policy to ensure adequate coverage for your family.
And don’t forget about disability coverage – odds are much higher you’ll need this type of insurance if you’re out of work for some time.
▢ Make or update a will.
Creating a will is important for everyone, but especially for new parents. Although it’s just one component of a comprehensive estate plan, a will allows you to appoint a guardian for your child or children, add your children as beneficiaries and make decisions about how and when to leave an inheritance.
▢ Consider legal advice
If you’re an 2SLGBTQ+ person, depending on your chosen path to parenthood, you may need to consider the cost of getting advice on the legal requirements required to establish and secure parental rights. Be sure to get legal guidance at an early stage of your planning.
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[1] Canadian kids cost parents more than $350,000 from birth to 17, Statistics Canada study suggests – The Globe and Mail
[2] Adopting in Canada Questions, Answers and Help (canadaadopts.com)
[3] Estimates of parental child care expenses in January to February 2022 (Statistics Canada)
