The arrival of a baby is an exciting time that comes with anticipation of first steps, first words, first birthdays and so much more. Becoming a parent is a life altering event that has a major impact on families. Along with thinking about the many child-rearing decisions to be made, there are also financial impacts to consider.
Once the parent of the newborn or newly adopted child is away from their work, one of the first impacts will be to employment income.
There are government benefits available to help with child expenses and with supplementing reduced income, including:
Canada Child Benefit (CCB)
- a monthly tax-free payment for eligible families to help with the cost of raising children under the age of 18.
- must provide proof of birth when applying for the first time.
- payable to the individual primarily responsible for the care and upbringing of the child.
- the amount received depends on the family net income.
- if there is shared custody, each parent will receive 50% of what they would have received if they had full custody, the amount received is based on their own adjusted family net income.
Child Disability Benefit (CDB)
- eligible if a parent receives the CCB and if the child qualifies for the Disability Tax Credit (DTC).
- payment is calculated considering the number of eligible children in a family and the adjusted family net income from the previous year.
Employment Insurance (EI) Maternity Benefits
- provides financial assistance for individuals away from work because they are pregnant or have recently given birth.
- cannot be shared between parents
- eligible to receive 55% of earnings up to $668 per week.
- maximum eligibility period is 15 weeks.
Employment Insurance (EI) Parental Benefits
- available for parents of a newborn or newly adopted child.
- two options are available, standard parental benefit or extended parental benefit.
- must be taken with specific periods starting from the child’s date of birth or the week the adopted child was placed in the adopted family’s care.
Standard Parental Benefit
- must be taken within 52 weeks from the child’s date of birth or the week the adopted child was placed in the adopted family’s care.
- up to 40 shared weeks with one parent not exceeding 35 weeks.
- eligible to receive 55% of earnings up to $668 per week.
Extended Parental Benefit
- must be taken within 78 weeks from the child’s date of birth or the week the adopted child was placed in the adopted family’s care.
- up to 69 shared weeks with one parent not exceeding 61 weeks.
- eligible to receive 33% of earnings up to $401 per week.
To be eligible for the EI benefits, the recipient must have accumulated 600 insured hours of work 52 weeks before the start of the claim or since the start of the last claim, whichever is shorter. Some employers will provide a top-up to the EI maternity benefits, so check with your human resources department to learn about potential options available.
Estate Planning
A significant inclusion in the planning for children is drafting or updating the parent’s Will. Include appointing a guardian for a minor child if both parents were to pass away. This ensures that the parents have selected the individual or family that will raise their child rather than leaving it up to the courts to make the final decision on guardianship. Additionally, a consideration is the assets of the estate if the children are named as the beneficiaries and are minors. A trust will need to be established with a trustee named that will hold and manage the funds.
Budget Review and Expenses
There are many added costs that come along with having a child which can include one-time large purchases such as a crib, car seat or stroller, along with ongoing expenses including diapers, food and clothing. It is important to begin planning early for these expenses. A good place to start is by reviewing your budget and assessing if there is surplus money after your fixed expenses are paid from your net income. Calculate how this surplus will be allocated, including setting aside funds in a separate account for the items you will buy and to supplement income once employment income is affected.
Many things a child uses are outgrown while still in good usable condition. Seeking out friends and family to see if they have gently used items they would be willing to part with is one way to potentially realize some cost savings. There are also retailers that sell a variety of used items for babies. When considering any pre-owned items, be sure to inspect them for potential flaws and do your own research to check they still meet safety requirements and standards. These are just a few ideas parents may want to consider if they are looking for potential savings on some of the items they are buying for their baby.
Keeping your finances on track while juggling childcare expenses will be an ongoing task. Talk to a qualified financial advisor to set-up a financial plan early. Assess the plan regularly to make the adjustments needed to meet the changes as a child grows and transitions from baby to young adult.
FirstOntario Credit Union in partnership with Aviso Wealth has an experienced team of advisors specializing in various areas of wealth management, including retirement planning, investment management, estate and succession planning, individual financial risk management and more. These professionals are here to help you plan for the future and reach your financial goals. Visit www.firstontario.com/Investments or call 1-800-616-8878 ext. 1700 to connect with a FirstOntario advisor and start growing your wealth today – your way.