By By iA Private Wealth, November 15, 2024
Having a child is an exciting time in life. Before the baby arrives, it’s useful to think about your finances, since raising a child can be both incredibly rewarding and very expensive.
While each family is different and costs will vary, the average Canadian family spends almost $300,000 to raise a child from birth to age 171. Accordingly, expect to budget roughly $17,000 a year (while also accounting for the impact of inflation) until your child turns 18 – and then the potential for post-secondary education will add to this cost. Aside from expenses related to food, clothing, personal care, toys, activities, etc., your daycare/babysitting costs largely depend on where you live and how many hours of supervised care your child will require.
Funding your family addition
Clearly, the more money you can put away, the better your financial situation will be when the baby enters the picture. You don’t have to do it all on your own, however. Family and friends might be able to help with gifts, babysitting and hand-me-downs, plus you may qualify for government support.
Parents who take time off work to look after their newborn or newly adopted child may receive up to 55% of their earnings in standard Employment Insurance (EI) benefits, to a current weekly maximum of $668. As the chart below illustrates, parents can share the benefits. The eligible period for benefits may last from 55 to 69 weeks (although ‘extended’ benefits beyond 55 weeks provide less support).
| Benefit name | Maximum weeks | Benefit rate | Weekly max |
|---|---|---|---|
| Maternity (for the person giving birth) | up to 15 weeks | 55% | up to $668 |
Maternity benefits can be followed by parental benefits. You can apply for both at once.
| Benefit name | Maximum weeks | Benefit rate | Weekly max |
|---|---|---|---|
| Standard parental | up to 40 weeks, but one parent cannot receive more than 35 weeks of standard benefits | 55% | up to $668 |
| Extended parental | up to 69 weeks, but one parent cannot receive more than 61 weeks of extended benefits | 33% | up to $401 |
Source: Government of Canada
Canada Child Benefit (CCB)
In addition to EI benefits, your family may qualify for the CCB. Payments are based on your adjusted family net income (AFNI) for the previous tax year, and are indexed to inflation. As an example, for the 2024 benefit period (July 2024 to June 2025), let’s say your family’s 2023 AFNI is below $36,502. You would qualify for the maximum regular CCB of $7,787 per year for children under six years old, and $6,570 annually for children between six and 17 years old. The maximum benefit gradually decreases for AFNIs above $36,502.2
Certain provinces and territories also offer financial assistance to help with child-rearing costs. For example, the Ontario Child Benefit (OCB) pays lower-income families up to $140 per month for each child under the age of 18, for the period from July 2024 to June 2025. If the AFNI exceeds $25,646, OCB may provide a partial benefit.3
Registered Education Savings Plan (RESP)
The cost of post-secondary education continues to rise. It’s good to consider an RESP, which is a savings and investing program designed to cover some of these costs. Currently, the lifetime RESP contribution limit is $50,000 per student (beneficiary). You may invest in many types of securities, from mutual funds and stocks to bonds and GICs, and the investment growth compounds – tax deferred – until the RESP beneficiary begins withdrawing assets.
As an incentive to save, the federal government offers the Canadian Education Savings Grant (CESG) that matches up to 20% of your contributions, to an annual maximum of $500 and a lifetime limit of $7,200.
Each province and territory has some form of student grant or loan, so it’s worthwhile to look into programs available in your area. Talk to your Investment Advisor for more details about how RESP contributions and withdrawals work, as well as questions you may have about EI, CCB or CESG.
Other things to consider
- Review your insurance coverage when preparing to have children. You may want to upgrade your life, disability and critical illness insurance plans to reflect your family addition(s). Also, if you’re covered under a group insurance plan, your children may qualify for certain medical and dental care needs.
- Update your will as your family grows, so you can include your children as estate beneficiaries. You may also use your will to make physical and financial care arrangements for your children in the event they’re still minors when you (or both parents) pass away.
An iA Private Wealth Investment Advisor can help you optimize your wealth plan for your growing family. Find one near you.
1https://globalnews.ca/news/10001146/canada-family-spending-children-statcan/
This article is a general discussion of certain issues intended as general information only and should not be relied upon as tax, legal or investment advice. Please obtain independent professional advice, in the context of your particular circumstances. iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Canadian Investment Regulatory Organization. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates.
iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Canadian Investment Regulatory Organization. iA Private Wealth is a trademark and a business name under which iA Private Wealth Inc. operates.
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