Budgeting for your baby

Few things in life are as exciting as preparing for a baby. From adorable socks and onesies to cute stuffed animals, the pending arrival of a new little one is a special time.

It's also a time of real change in your life, especially if it's your first. One aspect of your life that is going to change quickly, other than lack of sleep, is your budget. So how much does it cost to have a baby and how do you make a budget? We break down what you need to know.

For Canadian citizens and permanent residents who have public health insurance, the health care system covers most costs associated with giving birth.

For non-residents with a temporary resident visa, the estimated cost of giving birth in Canada ranges from $5,000 to $20,000. The total price will depend on where you give birth (health care costs vary between provinces), the type of delivery (ex. if you have a cesarian section), and whether you give birth at a hospital or in your home with a midwife.

The average cost of raising a child in Canada, from the time they're newborns to age 18, is estimated to be approximately $13,000 per year. For many Canadians, this is a substantial amount of money, and why soon-to-be parents need to plan, save money, and properly budget for a baby.

When creating your financial plan, you'll need to budget for a number of baby costs, including:

While Canadians are fortunate to have some form of government-funded maternity leave, many families still need to save in order to afford a lengthy departure from work.

Maternity leave is available to eligible applicants for a maximum of 15 weeks at a rate of 55% of regular earnings, up to a maximum of $595 per week. Employment insurance parental leave is also available, and there are two options to choose from:

• Standard parental benefits provide up to 40 weeks at 55%, up to a maximum of $595 per week
• Extended parental benefits provide up to 69 weeks at 33%, up to a maximum of $357 per week

Quebec has a separate parental leave program called the Quebec Parental Insurance Plan (QPIP). You can click here for more information on maternity, paternity, and parental benefits.

When planning for time off with your baby, consider that you may lose a large portion of one income. If your employer doesn't provide some form of top up, this can have a real impact on your finances during this period.

Babies are small, but they come with a lot of stuff. While you can probably do without the diaper-wipe warmer or designer baby clothes, you'll need to purchase a few big-ticket necessities in the first year:

• Car seat
• Stroller
• Crib
• Highchair

For month-to-month expenses, you'll need to consider the cost of diapers, baby wipes, baby soap, formula, and — when your little one is old enough to eat solids — baby food.

In addition to essential baby items, you may want to leave room in your budget for unexpected expenses. This might include anything from the cost of a sleep consultant (which could be a must for you after months of sleep deprivation) to purchasing extra baby clothes (because you didn't anticipate the number of outfit changes your little one will have each day).

After becoming a parent, you'll want to make sure you are doing everything you can to protect your child. Purchasing life insurance and preparing or updating your will are two necessary to-do items for all new parents. Should something happen to you and your partner, you want to make sure that your little one is taken care of financially. A will also allows you to choose a guardian for your child.

As your baby grows into a toddler and begins to walk and then run, you may quickly feel like you're ready for more space. This is when many families begin to look for a bigger home. Expanding your space is a substantial step. You'll need to consider the cost of a down payment, mortgage, home insurance, and property taxes.

For many families, the cost of daycare exceeds their monthly rent or mortgage payment. According to data from the federal budget, in 2020 the median cost of daycare for a toddler ranged from $181 a month in Quebec City to $1,578 in Toronto. For families with multiple children, the cost of childcare can feel overwhelming. In addition to daycare, if you ever need to hire a babysitter, you can expect to pay an average of $14.54 per hour. Nights out, important for any parent, need to be added to your budget as an expense.

For new parents who want to start saving early for their child's post-secondary education, you'll want to add annual RESP contributions to your budget. You can contribute to your child's RESP up to a lifetime contribution limit of $50,000. Parents can also take advantage of the Canada Education Savings Grant (CESG), in which the Government of Canada will match 20% on the first $2,500 contributed annually to an RESP for the child. In total, the government will contribute a lifetime maximum of $7,200 over 15 years of time per child who pursues post-secondary education.

While it may feel strange to think of raising your child as part of your financial decisions, it's necessary to plan, budget, and save throughout their lives. You'll want to adjust your budget so that you are saving enough to cover the costs of everything from reduced wages during maternity leave to unexpected baby expenses, childcare, and anything in between. While babies are expensive, they're one of the best investments you'll ever make!