You've picked a name and decided on nursery colours. But have you fully considered the economic impact of your little bundle of joy? Dance lessons, hockey equipment -- not to mention basic essentials such as food and clothing -- can really add up.
A recent survey by TD Canada Trust found almost one-in-two Canadians say they would be comfortable taking on debt to start a family and prepare for a year-long parental leave. But a little planning and some financial adjustments can go a long way in helping parents prepare and save for their expanding family's financial needs.
TD Canada Trust offers advice for expecting and future parents to help cover the costs of their baby-to-be:
• Budget for your pat-leave: Canadians are fortunate to have a full year of parental leave, but remember to consider the financial consequences of living on a lower income. Create a household budget, and factor in additional costs of a baby like diapers, gear and clothes. Having a realistic picture of your financial situation now will help determine where you can cut costs and find savings.
• Look for benefits and tax incentives: Speak to your financial advisor to see if your new family qualifies for any government benefits or tax incentives, like the Federal Government's Universal Child Care Benefit. You may also be able to deduct child care expenses from your income tax when filling out a tax return.
• Start RESP contributions early: For post-secondary students living away from home, the annual cost of pursuing an undergraduate degree is around $20,000, so start saving as early as you can. A Registered Education Savings Plan (RESP) is a special savings account that allows you to save for post-secondary education and expenses on a tax-deferred basis.
This means you only pay tax on investment earnings when you withdraw money, so you can take advantage of compounding interest. An amount of $50 per month may not seem like a lot now, but over an 18-year period you'll be well on your way to affording your child's post-secondary education.
