September can be a costly month for parents. (Pixabay)

Preparing financially for children can be a challenge

How young couples can get ready for the added expenses that come with having kids

With the start of the new school year many parents are taking a hard look at their financial plans.

According to a 2015 article in MoneySense magazine, it costs an average of $13,366 per year to raise a child in Canada. Times that by 18 and Canadian parents are looking at a cost of more than $250,000 to support each child into adulthood. That’s not an insignificant number, and perhaps it’s no surprise that couples are putting off having children until later in life, and sometimes not having them at all.

Financial planner Dale Collins, owner of Prosperity Planning, said there are certain strategies she suggests for couples who want to plan ahead for children.

Most would-be parents are aware of the high cost of strollers, car seats and cribs, and buying used stuff is a great way to save, but it’s other realities that often catch young parents off guard.

One strategy, which Collins also suggests for seniors where one spouse is thinking about retirement, is to live off one person’s salary in order to get a clearer picture of what life looks like with a single income. Ideally, this should be done over a period of several months to give couples a true understanding of their potential budget constraints.

The practice is necessary because of the difficulties many have with finding affordable childcare, often making it more practical to have one parent stay home while their kids are young.

“I think going down to one income, I don’t think a lot of people are prepared for that,” Collins said.

Another financial pitfall occurs when a parent returns from maternity or paternity leave. If they’ve been collecting employment insurance, there can be massive tax implications that follow, as the federal government holds back roughly 10 per cent of EI benefits. “[When] they return to work they end up with a big, nasty tax bill,” Collins said. “That can be something that gets overlooked.”

Tax hits can affect individuals with multiple employers as well, as each employer will withhold taxes as if they were the only source of a person’s income, when in reality the person’s combined income means they should be in a higher tax bracket.

Finally, Collins recommends planning for a child’s education as soon as possible. A registered education savings plan can help maximize savings as the government kicks in an extra 20 per cent of annual contributions, up to a maximum of $500 pear, with a lifetime limit of $7,200. “What I find a lot of people try to do is to take any baby bonus that they get from the government and just [put] that right into RESPs and that adds up quite quickly,” she said.

For more information on RESPs, visit

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