Becoming a parent is a life-altering experience that brings joy, challenges, and a world of new responsibilities. As you embark on this adventure, we're here to provide you with valuable financial planning advice, insights, and practical tips to help you secure your loved ones’ financial future. From budgeting for diapers to saving for your child’s education, from planning for maternity or paternity leave to building a secure future for your child, this blog covers all things financial for new and expecting parents. 

1. Create a Budget

While possibly the most obvious step of financial planning, creating and maintaining a budget is essential when expanding your family. 

Although you may already have a budget, the expected and unexpected costs that come with adding a new child to the family may take you by surprise. The CPA estimates that having a child in Canada costs about $10,000 - $15,000 a year. To avoid accumulating high levels of debt and financial stress, it’s important to lay out all anticipated expenses and create a realistic spending and savings plan.  

Here are some important considerations for when it comes to creating or updating a budget: 

• What is your monthly household fixed income? You may also want to note sources of flexible income from other earnings such as freelance work. 
• What is your family’s monthly spending? If you’re just starting a family, it’s important to research what the monthly additional costs of childcare, food, healthcare, and baby items will be. This is in addition to your monthly bills, living costs, debt payments and spending. 

• Tip: Shop wisely. Be frugal when shopping for baby supplies. Consider buying second-hand items or receiving hand-me-downs from friends and family to save on costs. 
• Tip: Allocate a portion of your budget to childproofing your home and purchasing baby gear. Avoid overspending on non-essential items. 

• What is your household’s monthly net income? This is the amount of money that remains once you’ve subtracted your monthly spending and expenses, including interest and taxes, from your monthly income. 
• Set financial goals and create a savings strategy. Define short-term and long-term financial goals for your family, such as paying off debt, buying a home, or saving for retirement. Create a plan to achieve these goals. It’s always a great idea to look for opportunities to contribute to your savings from your monthly net income.  

• Tip: Begin saving for your child's education as early as possible. Consider using tax-advantaged education savings accounts such as a Registered Education Savings Plan (RESP) or the Canada Education Savings Grant (CESG) to help cover future educational expenses. 

• Tip: Continue to save for your retirement, even with the new expenses of parenthood. Your child's future will be better secured if you maintain your retirement savings. 

The Financial Consumer Agency of Canada Budget Calculator is just one of the great tools that you can use to help you create your budget. 

2. Build an Emergency Fund  

Building an emergency fund is especially important when starting or expanding your family. This is a safety net for future unexpected expenses that aren’t a part of your family’s typical monthly spending. Some of the most common examples would include job loss, illness or injury, car repairs, house repairs, and for all pet owners - veterinary bills. 

Working towards a significant emergency fund may seem intimidating, especially if you don’t have a significant amount of remaining income after your monthly expenses, but it doesn’t have to be. It’s important to be realistic, consistent, and look for creative savings opportunities. Here are some helpful tips to get started: 

• Review your goals. What financial goal are you working towards? For an emergency fund, many people commonly set a goal of saving 3-6 months' worth of living expenses. Remember that an increase in childcare, housing, or living costs will impact the amount of time it will take to reach your financial goals. 
• Revisit your budget. Search for opportunities to cut back on expenses and create sustainable savings habits but be realistic. 
• Open a savings account. There are plenty of great savings account options that can allow you to separate your funds from your spending account, generate interest, and avoid high transaction fees. It’s important to choose one that you’ll be able to easily withdraw from in case of emergency. 
• Automate your savings. If you know the amount that you’re able to realistically contribute to your savings, you can set up automatic transfers into your emergency savings account for when your pay cheque is deposited. 

3. Update Your Taxes & Benefits

Update your tax withholding to account for any new tax credits or deductions you may qualify for as a parent. Explore Childcare Tax Benefits and tax-advantaged accounts like Flexible Spending Accounts (FSAs), Dependent Care Accounts, and the Child Tax Credit to save on childcare expenses. 

Eligibility for benefits, and the benefit amount can change over time. Visiting the Canadian Revenue Agency (CRA) website or speaking with a financial advisor is the best option when opting for childcare benefits. To get started, here are a few financial support programs that help with the costs of raising children: 

• Canada Child Benefit (CCB): A tax-free monthly payment to families with children under the age of 18. 
• Childcare Expense Deduction: A tax deduction that allows you to claim a portion of eligible childcare expenses on your income tax return. 
• Universal Childcare Benefit (UCCB): A monthly payment to all families with children under the age of 18. 
• Child Disability Benefit (CDB): A tax-free monthly payment to families eligible for CCB, with a child with severe and prolonged mental or physical disability. 
• Family Caregiver Amount (FCA): A tax credit for families with a member who has severe physical or mental impairment. 
• Provincial and Territorial Programs: Certain Canadian provinces may also offer childcare benefits or subsidies for expenses including daycare and preschool programs. 

4. Review Your Maternity/Paternity Leave Plan

Reviewing your maternity or paternity leave plan is crucial to your financial planning process. You’ll want to review and plan for the impact that the temporary reduction in income will have on your expenses as you continue to work toward your financial goals, while also providing for your child's well-being.  

Planning can help you make informed decisions, adjust your budget, and maintain financial stability during this important life event. Be sure to understand your workplace policies and benefits regarding maternity and paternity leave and integrate these potential changes in income into your budget. 

5. Protect Your Family with Health Insurance

Review your health insurance coverage and consider any additional coverage you may need for your child. While we’re fortunate in Canada to have many health care expenses covered by provincial insurance, this coverage doesn’t necessarily protect you or your family under every circumstance.  

Many unexpected out-of-pocket expenses can still arise in the face of illness or injury. This could include the costs of:  

• Medication 
• Hospitalization 
• Medical services 
• Appointments with health professionals 
• Dental care 
• Vision care 

When starting or expanding your family, it’s important to review your health insurance coverage, provided provincially and through your workplace and determine what coverage extends to your family. If there are gaps in your coverage, you may want to explore additional health insurance plans for you and your family. Here’s a tool to explore some of the top health insurance plans in Canada for 2023: https://hellosafe.ca/en/health-insurance  

6. Protect Your Family with Life Insurance

Evaluate your life insurance coverage to ensure your family is adequately protected in case something happens to you. Term life insurance is typically the most cost-effective option. 

Getting life insurance is another great way to protect your family in case of a sudden, unexpected tragedy. If you die unexpectedly, you would no longer be able to contribute to your household’s income. Life insurance provides your family with supplementary financial support for funeral costs, day-to-day expenses, mortgage payments and/or mortgage balance, childcare or children's education to relieve financial stress during a difficult time. Some life insurance companies like nowly even offer living benefits as well! 

When it comes to selecting the best life insurance plan that suits your family’s needs, it’s important to understand the difference between Term Life and Whole Life Insurance. Term Life Insurance pays out a lump sum death benefit if you (the insured) pass away during the term that the policy covers. nowly's term life plans are available in 10, 15, 20, 25 and 100-year terms depending on your needs and age at the time of application. For applicants aged 18-45 years, you could be eligible for up to $1,000,000 in life insurance coverage. 

Whole Life Insurance is a form of permanent life insurance that provides you with coverage from the day the policy is active until the day you die; in other words — for your entire life.  

Additionally, this type of life insurance also combines insurance coverage with investing. There is a cash value component associated with most whole life coverage. As you pay into a whole life policy over time, part of the monthly premium is invested and generates cash value. 

This cash value may be accessed during the policyholder’s lifetime either by withdrawing or borrowing against it. Since the coverage extends to one’s entire life and you retain the value you put into it, whole life insurance typically has significantly higher premiums. 

To learn more about life insurance, you can call 1-844-371-7173 and speak to one of our friendly nowly licensed agents or get a quick quote and complete our online application at your own convenience 24/7.

7. Create A Will & An Estate Plan

If you haven't already, create or update your will to designate guardians for your child and make clear your wishes for their financial future and your asset distribution.  

Planning your will and estate isn’t just for the “wealthy”. It’s an important step to protect your family no matter the amount or value of your assets. It also provides you with the opportunity to look out for your family's future by naming your children’s guardians in the event of your premature death. In addition to minimizing the risk of family conflict and legal battles, planning an estate can also allow you to reduce the amount of taxes on the assets you leave behind. 

Here are some important steps and tips in creating a will and estate plan: 

• Identify your goals and wishes. Begin to define your goals and intentions, including how your assets will be distributed, who will inherit them, and who you would like your children’s guardians to be. 
• Tip: Be aware of potential taxes and seek advice from a tax professional or financial advisor on strategies to minimize tax liabilities.  
• List your assets and debts. Compile a list of all of your physical belongings and financial assets, including real estate, bank accounts, investments, insurance policies, personal belongings, debts, mortgages, credit card balances, and digital assets. 
• Name your beneficiaries. Clearly specify who you would like to receive each asset and which portion of the asset they should receive. 
• Choose an executor and a trust. An executor should be a trustworthy and responsible person that is responsible for managing your estate and ensuring your wishes are carried out. You may also want to establish a trust to manage and protect assets for your child's benefit, or in complex financial situations. 
• Tip: You may wish to appoint a healthcare directive and a power of attorney to make medical and financial decisions on your behalf if you are unable to do so while living. 
• Consult an attorney. Consulting your will and estate plan with a professional attorney will ensure your will is legal and addresses your specific needs and wishes. 
• Tip: You will need to sign your will in front of a witness and follow all legal formalities to ensure its validity. 
• Update it regularly. Continue to update your will and estate plan as your family grows and your financial situation changes. 
• Tip: Talking to your loved ones about your will and estate plan can help prevent future confusion and disputes. 
• Store it safely. Be sure to store the original copy of your will in a secure place, such as a safety deposit box. Ensure that your attorney, executor, and trustees have up-to-date copies as well. 

8. Focus on Financial Literacy

Improve your financial literacy by reading books or taking courses on personal finance. Understanding your finances will help you make better financial decisions and provide a secure and stable environment and example for your family. It can also provide you with the opportunity to pass your financial knowledge on to your children to eventually support them in their financial goals as adults. 

9. Seek Professional Advice

Fostering your own financial literacy is important, but there is always more to learn. Consulting with a financial advisor who specializes in family finance can help you create a customized plan based on your specific needs and goals. 

Financial advisors can offer you: 

• Experience and knowledge. Leaning on the experience and knowledge of a professional can help ensure that you have up-to-date information to make informed decisions. 
• Personalized advice and goal setting. Your family’s financial goals and circumstances are unique to you. A financial advisor can help assess your specific financial situation, needs and objective to create a plan that’s right for your family. 
• Investment guidance and assessment of risk management. Investing your money can be challenging and confusing. An advisor can help you determine the best investments that align with your risk tolerance, comfort level, timeline, and financial objectives. 
• Tax strategies. The right tax strategies can help you minimize your tax liabilities and optimize your contributions to tax-advantaged accounts. 
• Estate and retirement planning advice. In addition to consulting an attorney, a financial advisor can help you create an estate plan that distributes your assets and finances as you would like, while minimizing taxes and securing your family’s financial future. They can also help you build your retirement savings plan and make social security and pension decisions. 
• Education savings strategies. Saving for your children’s higher education can be daunting. A financial advisor can help you understand processes of financial aid and explore education savings options. 
• Behavioral guidance and monitoring. Financial advisors can also offer support and guidance to follow your budget and to avoid making impulsive financial decisions during market fluctuations. 
• Peace of mind. Financial stress is one of the most significant emotional burdens on adults and especially on parents. A financial advisor can save you the time and effort to plan and manage your finances independently and help guide your decisions to reduce the stress of your family’s financial future. 

10. Look for Opportunities of Support

Be sure to take advantage of the supportive community made for parents locally and across Canada. There are some great opportunities out there to access free or affordable support as a parent, including fun events and giveaways!  

This month at nowly, we’re here to make your new parenting experience just a little bit brighter with our Baby Bliss Giveaway, so you can get back to living in the now with your new family. Enter your contact information on our giveaway page for a chance to receive a gift card of up to $2,500 from our list of retailers: Babies R Us, The Children’s Place, Pottery Barn Kids, Snuggle Bugz, and Gymboree. Don’t miss out on your chance to receive one of eight of our prizes - no purchase necessary.  

Your greatest adventure to parenthood begins nowly. 

We hope the insights we've shared have empowered you to make informed decisions, set a course for financial success, and embrace the joys of parenthood. Whether you're budgeting for the arrival of a new family member, saving for their education, or preparing for your own retirement, remember that every choice you make today contributes to a brighter and more secure tomorrow.  

Thank you for joining us on this financial parenting adventure. We wish you and your family a lifetime of joy, prosperity, and financial well-being. Here's to a future filled with all the wonderful adventures that parenthood and financial planning bring.