How to prepare financially for your newborn’s arrival

2 min.

Make the right choice: Opt for peace of mind before your baby is born by preparing your finances in advance.

Pregnancy is a period that demands great change and preparation. Between choosing a name, shopping and decorating the nursery, don’t forget to review your finances so as to seamlessly adapt to your new lifestyle! There’s no question that having a child brings with it additional expenses and, possibly, less income while on parental leave.

Here’s how you can put your finances in order before your baby arrives!

1. Get to know the various kinds of parental benefits available

The Quebec Parental Insurance Plan (QPIP) offers various options for you to take time off work to care for your newborn: maternity leave, paternity leave and parental leave.

The benefit amount and period of your leave depends on your province of residence and certain criteria. So, maternity leave in Quebec and maternity leave in Canada (except in Quebec) are not the same.

To be fully prepared for your baby’s arrival, inquire with your provincial government to determine how much you are entitled to while on leave. This information will be essential when it comes time to create your budget for the next year!

Additional leave and benefits

Good news! Some employers offer supplemental leave and benefits. You might also be eligible, depending on your situation and place of residence, to receive tax deductions for families with children or parental benefits such as family allowances and parental insurance benefits. Be sure to consider these when planning your finances.

2. Create a detailed and realistic budget

Did you know that, in their first year of life, a baby takes up 20% of a family’s budget? Beyond helping you achieve your financial goals, budgeting for your new reality is the key to keeping stress and financial troubles at bay.

Some of the payments you used to make will stop during parental leave. You will not have to contribute to:

  • Employment insurance
  • QPIP (in Quebec)
  • The Canada Pension Plan (CPP)
  • The Quebec Pension Plan (QPP)

Don’t worry, even if your contributions are paused, there will be no impact to the income the government provides you in retirement. For example, in its calculation for the basic component of your pension, the Canada Pension Plan (CPP) excludes up to eight of the years your salary was at its weakest.

How to create a budget

It’s easier than you’d think! Follow these steps:

  • Define your goals
  • Make a detailed list of your income
  • Make a detailed list of your expenses, including what you intend to dedicate to savings (RRSP, TFSA, etc.)
  • Adjust your budget every month

Pro tip: To not forget anything, use our online budgeting guide! Also, before beginning to work on your budget, have all your statements from the previous months on hand. The more accurate your budget, the better it will apply to your real life.

Create a budget based off your income for the next year. Don’t forget to account for additional expenses for your newborn, such as additional benefits like the Canada Child Benefit (CCB), additional insurance needs, etc.

Tips to help you save!

Will you need to cut back to follow your budget? Here’s some advice for saving on child expenses:

  • Make a list of products that are essential in a baby’s first year (many unnecessary products are recommended by specialty stores)
  • Create a baby shower registry to avoid receiving unnecessary or duplicate gifts
  • Borrow short-term items (e.g., booster seat, bottle sterilizer, bottle warmer, etc.) from family and friends
  • Buy second-hand clothes, equipment, furniture and toys (many items are only needed for a short amount of time; there’s no need to buy everything new)
  • Keep your eyes peeled for sales on baby must-haves, such as a car seat.

And more!

3. Keep up with your good saving habits

In an ideal world, it’s recommended that you put aside 10% of your annual income for contingencies, future plans and retirement. The earlier you start, the better. Saving might be harder with the arrival of your baby. Be that as it may, try to continue putting money aside, even if it’s just a bit each week!

Good to know: Your Tax-free Savings Account (TFSA) is a great tool, since your money will remain accessible, just in case.

An RESP is about to become an attractive savings opportunity for you

Before your baby is born, think about opening a Registered Education Savings Plan (RESP). This savings option offers interesting potential returns thanks to generous government grants worth up to 30%, depending on your province of residence! An RESP allows you to start saving for your child’s post-secondary education. Help make your child’s dreams a reality! There’s nothing to it: contribute, save and withdraw!!

Your group pension plan during parental leave

It’s possible to contribute to your group pension plan during your leave! However, since this is yet another expense you’ll need to consider budgeting for, some employers allow you to buy back service after you return from leave, if you choose to temporarily pause your contributions.

Returning to work after parental leave

Your child’s first year of life is without a doubt one of the most remarkable. Because time flies by, it’s a good idea to think about the different childcare options available when you return to work. Again, you will have to re-adjust your budget to this new reality… and don’t forget to re-evaluate your insurance coverage!

4. Review your insurance coverage

As we say, insurance ensures your peace of mind… So, to be done with one more chore as you prepare to welcome your new child into the world, you will want to re-evaluate, if not add to, your current insurance coverage.

Do you know what medical expenses are covered, what your policy’s deductibles are and what possible limitations apply to your insurance premiums while on parental leave? It’s a good idea to figure this out well before the big day.

Maybe you would like to buy or enhance your life insurance, disability insurance and critical illness insurance policies to make sure your growing family is adequately protected? Maybe you would like to change the beneficiaries of your individual and group insurance and savings products? Speak with one of our financial security advisors and find the solutions that best fit your situation!

Free insurance programs for children

Why insure your baby in case of an accident? To get the financial assistance you would need to care of your family in the event of an accident if the worst were to happen. And it’s free!

Have you heard of the Peek-a-Boo Plan, our free accident insurance for children under one year of age? If an accident were to occur, you’d have recourse to a lump sum payment or have your expenses covered.

The Kiddy Plan is a free critical illness insurance option for children between two and five. Since nobody is immune to a critical illness diagnosis, this plan would provide you with a tax-free lump sum payment to help get your child the best care possible.

Update your will

Think about updating your will to include your baby in your estate! At the same time, you can make the necessary arrangements for your newborn’s physical and financial care in the event of your death (if they are still a minor at that time). The idea is to prevent an unfortunate situation and to protect your loved ones’ financial future!

Good to know: Don’t forget to make the necessary arrangements to pay for your child’s school expenses in the event of your death.

Returning to work after parental leave

Your child’s first year of life is without a doubt one of the most remarkable. Because time flies by, it’s a good idea to think about the different childcare options available when you return to work. Again, you will have to re-adjust your budget to this new reality… and don’t forget to re-evaluate your insurance coverage!


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