Today we are featuring a blog post written by Emily Dimytosh from Pineapple Finance.
Expecting a little one for the first time feels like an endless parade of checklists – appointments to book, foods to eat vs. avoid, what to put in your registry, your hospital bag etc.
But as my husband and I were preparing to welcome our first child, we were struck by one checklist that never crossed our endless Google searches – how to prepare our bank account for our bundle of joy.
We had a rough idea of what might be on such a checklist, like budgeting out what baby gear might cost, and opening an education savings plan. But no one told us about the hidden costs of prenatal care, postpartum care, and parental leave, or the myriad of financial items you can (frustratingly!) only do after baby is here.
So, in the spirit of adding one more checklist to the multiple you already have bookmarked, we proudly present The Missing Financial Checklist for New Parents. Enjoy!
1. Figure out what benefits you get from work
Why it Matters: Did you know that you may need to pay for your own health care plan while you are on parental leave? If your employer offers a top-up, do you know when/how it is paid, and how long you have to return for in order to avoid having to repay it?
Some employers offer their employees additional benefits when they become new parents, and you want to get clear on the details of these programs. Contact HR to ask about:
If they offer a ‘top up’ to your salary in addition to Maternity / Parental EI benefits, and the terms associated with returning to work after your leave in order to keep the full top up. For example, some employers will ‘top you up’ to 100% of your salary for 12 weeks on the condition that you return to work for a minimum of 5 months once you are back from leave. If you don’t stay for the full five months, you may need to pay back all or part of your top up.
How and when your Record of Employment is sent to Service Canada to process your maternity and parental benefits. Service Canada requires a document called your Record of Employment to process your maternity and parental benefits application, some employers submit this automatically to Service Canada, some require you to submit it yourself. You want to be clear how it is sent and when it is sent – for example immediately on your last day or on the payday following your last day, so you can plan for when your EI will be processed
If you can use vacation and sick days to extend your parental leave
If you continue to accrue vacation days while on parental leave
How Health and Dental benefits work while you are on leave – and costs to add a child to your plan
How pension or retirement savings contributions work while you are on leave. Some employers will continue to make minimum contributions while you are on leave, and some may even give you the option of making voluntary contributions that they will match
2. Start looking into child care options and costs
Why it Matters: You may have suspected that baby gear and diapers were going to be expensive, but have you seen the costs for childcare?
One of the biggest baby budget items is child care - monthly fees for infant child care (birth to 2 years of age) vary from $175 in Montreal to $1,750 in Toronto (that’s right, add a zero!).
That’s why it’s important to start looking into childcare now to get a sense for what arrangement works best for you (Registered daycare? Private daycare? Nanny? Parent stays at home?) and get on any waiting lists. Spots are incredibly limited in some cities, so you want to get on the waiting list as quickly as possible.
3. Make your pre-baby budget and post-delivery budget
Why it Matters: Babies are stressful. Money is stressful. Baby stress + money stress = double whammy!
You may have already sketched out rough costs for the one-time costs of baby gear, but did you include:
Prenatal vitamins (seriously, these add up fast!)?
Physiotherapy / massage as part of your prenatal and postnatal care?
Any additional genetic tests you may want to take, that may not be covered through your existing healthcare plans?
Prenatal courses or newborn courses to make sure you are armed and dangerous for labor, delivery, and beyond?
A doula to support you in labor/delivery and postpartum?
Post-baby, do you have a budget that includes the new monthly costs for your tiny human, such as diapers, formula, clothing, personal care products, and books/toys? What about support for lactation, pelvic floor physiotherapy, and sleep training if you need it?
Immediately after the birth, do you anticipate hiring help for pets and cleaning? What about babysitting when you feel like having a date night again?
Finally, if you are planning on returning to work, what does your budget look like once you are back in the office and using childcare?
4. Set up a dedicated tracker or savings account for baby costs
Why it Matters: It’s super tempting to go overboard on baby gear. A dedicated account or excel spreadsheet will show you exactly how much you are spending and saving, and allow you to monitor your progress.
5. Top up your emergency fund
Why it Matters: Although you may have been totally cool living on ramen noodles for 2 months, that dietary regime may not fly as well with an infant. Emergency funds become more important than ever with a little one in the mix.
Many advisors recommend having between 4 to 6 months of expenses saved. Even if you had 4-6 months saved before, keep in mind your increased budget size with baby.
Aim to have your emergency fund topped up by the time you head out on parental leave.
6. Update your Holy $hit Plan
Why it Matters: Who would look after your little one if something happened to you? What funds would be available to take care of her or him? This is where a will and life insurance come into play.
Your will gives the court specific instructions on how to handle who looks after your child (also called guardianship) and your assets.
Life insurance provides funds to help take care of your family.
Both are ridiculously important. And actually a lot easier and less expensive than most Canadians think!
Before you say, ‘We’ll do it once baby arrives’, remember – most parents who actually have a will and life insurance got them before baby arrived. Life is super hectic after.
Willful makes it super easy to create a 100% legal will, with unlimited updates throughout your life.
PolicyMe and Emma allow you to apply for life insurance in minutes (seriously, minutes, with no human agent required), and because they are not commission based, you get unbiased advice on how much life insurance you really need.
7. Get ready to apply for your maternity and parental benefits
Why it Matters: The application for Maternity Benefits and Parental Benefits takes about an hour, and eventually you will need to submit a Record of Employment from your employer and 9 other pieces of info. Because you can only apply for maternity and parental benefits after your last day of work, you want to make sure you have this information close at hand to apply as quickly as possible.
8. Get ready to apply for a birth certificate and SIN
Why it Matters: Want to open up an RESP for your child? Apply for tax benefits that you are now eligible for as a parent? You will need your child’s SIN.
To get a SIN, you need your child’s birth certificate. And to apply for that you may need your and your partner’s birth certificates. Get all the information ready to go now so it’ll be easier to apply once baby is here.
After Baby Arrives
Unfortunately, there are certain things you can only do AFTER baby is on the scene. We’ve split out what you want to do sooner rather than later, based on common deadlines.
1. AS SOON AS POSSIBLE – Apply for Maternity and Parental Benefits if you worked right up until delivery
See point 6 above about maternity and parental benefits
2. AS SOON AS POSSIBLE - Apply for government ID (Birth certificate, SIN, Health Card)
Pretty straightforward, paperwork stuff. Parents can use the Newborn Registration Service to complete your Birth Registration and apply for a Birth Certificate, Social Insurance Number, and Health Card all in one go. Find the link to your Province’s service here.
3. WITHIN 30 DAYS - Add your child to your employer’s healthcare plan
Most employer-sponsored health plans give you 30 days to add a child to your plan after their birth, otherwise you need to wait until the next enrollment period to adjust your plan.
4. THE SOONER THE BETTER, BUT NO REAL DEADLINE - Apply for tax credits
Canadian Child and Family benefits include the Canada Child Benefit, GST/HST Credit, and various provincial and territorial benefits and credits.
You can often apply for child and family benefits when registering the birth of your newborn through the Automated Benefits application. Once you’ve completed the birth registration for your newborn, provide your consent to let your information be shared with the Canadian Revenue Agency. See this link for more information on how this works.
5. THE SOONER THE BETTER, BUT NO REAL DEADLINE - Open an RESP
Although the prospect of saving for a $120,000 university degree may be daunting, the good news is you have 18 years to save for it, with lots of help from the government along the way! IN fact the Canadian Government will kick in 20% to your child’s RESP up to $500 per year!
Opening an RESP right when Baby is born is a helpful nudge to encourage you to start savings earlier rather than later. It also gives friends and family a gifting option that may last a wee bit longer than another onesie or toy.
6. WITHIN THE FIRST YEAR - Adjust beneficiaries
Registered accounts like RRSPs, TFSAs, and work retirement savings plans commonly have beneficiaries and contingent beneficiaries. This ensures that if anything happens to you, the account can be quickly transferred to your chosen beneficiary, and if anything happens to you AND your chosen beneficiary, the account is transferred to your contingent beneficiary.
Many people in partnered relationships list their partner as their main beneficiary, and a sibling or other relative as the contingent beneficiary. With a little one in the mix, chances are that if anything were to happen to you or your partner, you would rather the account transfer to baby vs. your sibling or cousin.
Make sure you check your RRSP, TFSA (including any you have through work!), and your life insurance policy.
7. ONCE YOUR PARENTAL LEAVE IS OVER - Keep funding your retirement
Taking time off for parental leave is expensive and saving for retirement in that period can be challenging, if not impossible. The key is to get back on the savings train as soon as possible - otherwise you may be inadvertently burdening your children down the road if you need their help to get through retirement!
As soon as it’s feasible again, start topping up those retirement savings.
Pineapple Finance Co is a collaboration between Emily and Elizabeth with a goal to answer one simple question: could they use Instagram to improve Canadians' financial literacy.
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