Being a parent is an incredibly rewarding and important job, but it comes with responsibilities that can be challenging for new parents to handle. Between scheduling doctor’s office visits and making sure your child’s meeting their milestones, it can be hard to juggle the financial demands of parenthood on top of that.
But while the thought of budgets and savings can be overwhelming, getting this part of the parenthood puzzle under control is essential.
We’ll take a look at some of the more important financial tips you can use as a new parent so you can worry less about the piggy bank and more about which bedtime story to tell.
1. Set up an RESP
Your child’s education will probably be one of your most expensive financial commitments as a parent, so it’s a good idea to start saving for it as soon as possible.
An RESP allows parents to save money for a child’s post-secondary education and gives the government the opportunity to match those contributions through tax credits. Getting an RESP in place–and contributing early–means you won’t be scrambling to save for your child’s education at the last minute.
What’s a CESG?
The Canada Education Savings Grant (CESG) matches 20% of the first $2,500 invested each year by a subscriber, up to a maximum government contribution of $500 per year.
That means that if you contribute $100 to your plan annually for 10 years (which is typical), you’ll receive $20 from the government in each of those years—$200 total!
When it comes time for your child’s post-secondary studies, they can withdraw their savings without penalty as long as they use it toward tuition fees or books related specifically to their education program.
Post-secondary education might seem far away, but putting an RESP in place now is a step in the right direction toward your family’s financial future.
2. Protect your family with life insurance
It’s not fun to think about, but life insurance is a key step in keeping your family financially protected. Life insurance gives your family a safety net and will protect them against financial burden in case the unthinkable happens and you’re no longer around to help.
A good life insurance policy can help make sure that not only final expenses are covered, but help your loved ones stay on top of your mortgage, keep up with bills, and support your children’s education.
Life insurance works by giving your financial dependents a one-time, tax-free payout if you were to pass away, which they can then use to help cover a variety of expenses: remaining debts, final expenses, and general living expenses your income was going toward.
There are two main types of life insurance:
- Term life insurance
- Whole life insurance
While whole life insurance gives you lifelong protection, it’s also typically much more expensive. Term life insurance, on the other hand, is the best option for most families. It provides you coverage for an agreed-upon length of time (usually 10, 20, or 30 years). That means your family is protected when they need it most, such as when your children are still young and dependent on your income.
Plus, with lower premiums, that frees up some of your family’s budget!
You might also want to consider applying for life insurance for couples with your partner, so your family has double the protection in place. That way, you know your family is covered from all angles. After all, when it comes to your loved ones’ financial security, it’s best to leave no stone unturned.
3. Create a (flexible) budget
Finally, create a family budget (but keep it flexible!). It might sound obvious, but having kids is expensive. There are diapers and clothes and books, not to mention daycare costs. But while your budget should account for this and more, it’s important to remember that as your kids grow up, those costs will change; diapers might be swapped out for countless pairs of shoes for growing feet, and daycare costs might become hockey equipment costs.
Have room for the unexpected
But even in your day-to-day, it’s good to have some room for drop-in expenses. After all, when it comes to children, life can be full of surprises—whether it’s an unexpected expense like painting over a doodle on the walls or something more pleasant like an invitation out for dinner at one of your favourite restaurants (yes please!).
Having a flexible budget rather than one that locks down all your spending is best so that when things come up unexpectedly, they don’t put extra pressure on your finances.
Parenthood can be overwhelming, but your family’s finances don’t have to be! It might seem like expenses come from all directions when you have children, but as long as you’ve got the essentials covered, the rest will follow. After all, the rewards of parenthood far outweigh the costs.