Expecting a baby? Congratulations! Preparing for a new family member is exciting but it’s also full of unknowns. We can’t answer every what-if question you have, but we do have some advice for how to prepare for your new arrival financially. Let’s talk about government benefits for parental leave, making sure you can afford the leave you want, budgeting for baby expenses, and planning ahead by updating your financial goals, life insurance, and legal will.
Government benefits to help you out
The federal and provincial governments offer benefits designed to help parents navigate the costs of raising a family. You can find all the details on the Government of Canada website. To get you started, let’s take a look at the employment insurance benefits designed to support new parents:
Maternity benefits
If you're away from work because you are pregnant or have recently given birth, you can apply for maternity benefits. These are payments of up to 55% of your average weekly earnings, to a maximum of $595 a week, for a maximum of 15 weeks.
These benefits cannot be shared between parents. In addition to maternity benefits, you may also be entitled to parental benefits.
Standard parental benefits
Parental benefits provide you with payments of up to 55% of your average weekly earnings, to a maximum of $595 a week. These benefits are available to biological, adoptive, or legally recognized parents and they must be claimed within a one year period of the week the child was born or placed for adoption.
You can receive standard parental benefits for a maximum of 35 weeks and share them between parents. If you’re also eligible for maternity benefits, this means you could get up to 50 weeks of leave.
Extended parental benefits
To give new parents the opportunity to take a longer leave, the government also offers extended parental benefits. These provide you with payments of up to 33% of your average weekly earnings, to a maximum of $357 a week. You can receive extended parental benefits for a maximum of 61 weeks and share them between parents. If you’re also eligible for maternity benefits, this means you could get up to 76 weeks of leave.
Applying for benefits
It’s a good idea to start completing your application for benefits before your child’s arrival. Just go to the Service Canada website.
Benefits for the self-employed
To qualify for maternity and parental benefits you need to contribute to Canada’s EI program. This means you need to be registered for EI special benefits for self-employed people. You can’t claim any benefits until you have been registered for at least 12 months.
Parental leave - what do you get and what can you afford?
As we’ve just reviewed, the Canadian government offers partially-paid parental leave to new parents. This means that even when you receive these benefits there will be lost income. Plus, benefit payments are still considered income, so they’re subject to tax. As a result, many people don’t take all the leave they’re entitled to - they just can’t afford it.
Take some time to think about how much leave you want and then budget it out. If you can’t afford it with the help of EI benefits, you still have other options. For example, talk to your employer. Many companies offer employee benefits that include parental leave top-ups. Talk to Human Resources about all the options available to you. Quick tip: You don’t have to be pregnant to do this - if a baby is in your future, plan ahead!
Budgeting for a baby
These bundles of joy need a lot of stuff! The expenses can start to add up, and if you’re on leave you’re probably living off a lower income. If you don’t already have a monthly household budget, now’s the time to start one!
Some baby expenses will be a one-time purchase (like a crib), while others will be ongoing (diapers, food, clothing, etc.). Try making a budget for the first year of your baby’s life, which will include all one-time and ongoing expenses. Choose the method you’re most comfortable with - there are lots of apps and websites out there, but a spreadsheet or pen and paper can also work.
What can you get for free?
When you're expecting your first child your family and friends will have a lot of free advice to give you - whether you like it or not. The best news? They will also have a lot of baby stuff. Before you go on a spending spree, see if other parents you know are looking to declutter their closets and basements by gifting you with onesies, baby blankets, a rocking chair - you never know what you might get for free.
Re-examine your financial plan
Whenever your life changes, it’s a good idea to take a close look at your finances. Having a baby may re-prioritize some of your savings goals, for example. You’ll soon have more expenses, but that’s not an excuse to neglect your savings. To make sure that you’re financially prepared for a baby, talk to a financial advisor.
Also, it may be a long way off, but there’s no down side to starting to save for your child’s education early. Learn more about RESPs (Registered Education Savings Plans).
Update your will and life insurance
If don’t have a will yet, it’s time to make one. A legal will assigns guardianship for your child and protects not only your assets, but also your dependents and beneficiaries. Preparing a will helps make sure that your children are cared for the way you want in the event of your death, or the death of your partner.
Like a will, life insurance helps protect they people left behind. If you already have life insurance, make sure that you add your new child as a beneficiary. If you don’t have life insurance, start looking into your options - you’ll get a better deal when you’re young and healthy.
We can help you make a plan
Not sure how to prioritize your family's finances or plan for future expenses? That's why we're here!
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