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The arrival of a first born disturbs our schedules, interrupts our sleep, and takes a big bite out of our budgets.
According to the Fraser Institute1, meeting a child’s basic needs costs from $3,000 to $4,500 per year in Canada. This can rapidly escalate to over $10,000 for higher income families, and many new expenses crop up before the baby arrives.
Numerous strategies are available to both young and more experienced parents, for ensuring their children’s future. Four families share their household budgeting tips with us.
How newborns impact day-to-day expenses
As the children continue to grow, new expenses appear, the most important being food and day care costs, the latter of which can vary depending upon whether or not the child is in a government-subsidized daycare centre. The daily rate also depends upon the family income, since government subsidies cover part of the costs.
This is over and above such items as insurance premiums, toys, day camp, sports activities, dentist and additional medical expenses, not to mention school expenses. Money also has to be found in the budget for school supplies, pedagogical days and transport..
Parents have to expect the unexpected and may sometimes find it hard to keep track of their spending. One of the challenges they face is trying to take a longer view and planning for the future. A sensible budget makes it easier to plan for post-secondary studies and put money aside for a rainy day.
Helping parents balance their Spending Plans
Once parents have a firm understanding of the expense involved in raising a growing family, they need a household spending plan. I don’t like the word “budget”, it sounds so restricting and negative. I believe every family should plan their spending. This is done through a spending plan, to help them when emergencies arise.
Balancing your spending plan gets even harder if parents are working less at a time when their expenses are increasing: some opt to work part time for a while when a new child arrives. Others use up parental leave so their children can enjoy the luxury of having one parent at home as long as possible.
There are many ways to economize: limiting restaurant outings, repairing items instead of replacing them, or even re-thinking the cable bill. We often pay for services we aren’t even using, and frequently under-estimate incidental expenses, even though they can take a big bite out of our plans!
Lastly, we have to make sure our financial planning is up to date and is always being updated, your plan is only as good as you work it. Financial Planners are well aware that a spending plan you can’t follow isn’t going to be much good.
Obviously, coming up with a reasonable family spending plan is a big challenge. There are, however, many ways a fee based financial planer can work with young families to create a solid plan for every day as well as into the future
Savings for small families
Simply balancing your spending plan is a victory, in and of itself, and is the first step to starting to set money aside. Saving is always a good idea, even if it’s only to have a financial cushion to fall back on.
Even though we know how important it is to save for the future, many households still don’t save enough. Despite a slight increase following the economic crisis of 2008, the savings rate remains low.
On the other hand, more people are saving for their children’s education, 42% of students under 17 receive grants through the Canada Education Savings Grants and through Canada Childcare Benefit. A lot of families use this to cover the needs for their children and when the needs start to go down, they start investing it into RESP for post secondary education.
Education savings plans are an especially sound financial choice, since you immediately receive 30% back in the form of federal and provincial grants. If you have an RESP family plan, you can also transfer your investment from one child to another.
The key to successful saving: start early
An investment that earns 4.5% annually will increase in value by 55% within 10 years. If it is cashed in after 20 years, it earns yields of 141%, which is the beauty of accrued interest.
Both young and more seasoned parents need to be highly organized and resourceful to manage their family’s finances. But it’s not an impossible goal. Not to mention that a happy family life is worth all those hours of planning. Working. Now with a fee based financial planner will pay dividends in the future that you won’t believe.
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