Vancouver financial planner Odette Morin remembers doing some research for a client who was debating whether or not to have children. The woman wanted to get a sense of just how much cash she'd be forking out to bring a child into the world. Morin quickly realized the answer probably wouldn't be what her client was hoping to hear.
"You cannot just look at the numbers, because it would be so discouraging nobody would have children," says Morin, founder of You First Financial Planning. "From child care to dental work, you can definitely see the difference between couples with children and without — it's huge. Those with children usually have to plan to retire quite a bit later."
As any parent can attest, once a baby comes bouncing into your life, so too does a crib load of expenses. Count on spending more than $10,000 during the first year of a child's life alone, according to figures from Manitoba Agriculture. And to raise that darling little cherub to 18, it'll cost about $167,000.
The numbers can overwhelm. Financial experts share their best tips for parents to keep finances — and frayed nerves — in check.
"Start with planning maternity leave, making sure you have some savings in advance and so that afterward you'll be able to meet the costs of daycare, caring for a child, and saving for a child's education," Morin says. "You can't start saving for retirement after the kids are gone. You have to plan way ahead, which will help relieve stress along the way."
Morin recommends doing a budget for different stages: before children, parental leave and after parents return to work.
"That will allow people to ask 'Can I afford this new house I'm dreaming about? Can I still plan to retire early?' We want to do it all but there's only so much income. It's a matter of being really realistic," she says.
It's also vital to be realistic about how many kids you want to have, says ScotiaMcLeod wealth manager Rhonda Sherwood. "Maybe if you live in Winnipeg it's realistic to have five kids, but if you're in Vancouver or Toronto one or two is more common. You really have to sit down ahead of time and think about what you can afford and what sacrifices you're willing to make."
Consider the cost of living
As Sherwood points out, people who live in one of Canada's most expensive cities are especially hard hit when it comes to having a family.
"Almost every single person I deal with [in Vancouver] is mortgage-poor, even in two-income households," Sherwood says. "One income pays the mortgage while the other takes care of everything else, and often there's a basement suite to help. Between property taxes and the cost to run the home, how much do you have left for a child?
"Maybe owning a house isn't a priority; maybe it's a townhouse instead," she adds. "Maybe it's going to take moving to the suburbs or renting. It's about making responsible choices ... Can you cover your housing costs when your mortgage goes up? Interest rates will go up."
Look everywhere for ways to cut costs
"People want the same lifestyle after kids as they did before, but when you have a family you really have to make sure you put your family in best financial situation they can be in," Sherwood says. "Maybe you have one vehicle not two. You might take transit. Can you afford to insure your kids on your car? Can you afford the insurance for yourself?
"If you can't afford something, you can't afford it. How are you willing to downsize your life? What are the things you're willing to do to bring a person into the world?"
Other ways to save money are to find competitive cellphone rates and get rid of your land line, consolidate debt to make payments with a lower interest rate and limit the amount of money you spend on dining out.
"Eating dinner out used to be considered a treat; now it's the norm," Sherwood says. "People need to set up some kind of grocery or meal plan and buy groceries ahead of time and buy in if they want to commit to saving money in that area. I think there's way too much discretionary spending on things like work lunches and coffees."
Have an emergency fund
"Everybody should have this, but it's especially important if you're having a family, either six months of expenses or a line of credit that you commit to not using unless it's an emergency," Sherwood says. "With a line of credit you have to have integrity with yourself. With a lot of people, once they have available credit they're in debt again."
Take out insurance policies early
"If you're young, look into life insurance now, when premiums are low," Sherwood says, noting that people in their 20s could be paying as little as $20 per month, while those in their 50s can expect to be charged hundreds. "Being in your 20s is a cheap time to get insurance."
The term is almost a dirty word, but Morin points out it's something that only needs to be done every year or so or whenever there's a big change in your life.
"It isn't something you need to do every day; it's not tracking your expenses," she says. "It's just deciding where you want your money to go. You have so much money coming in, so much in fixed expenses, and the difference is what you can allocate in a certain way. It's thinking like a corporation or a government: you can save for different things depending on what your objectives are."
Avoid overindulging your kids.
"I think a lot of parents feel guilty that they're not spending as much time with their kids as people did in the old days when mom stayed at home, and because of that, they spoil them to excess," Morin says. Sure, parents want their children to have every advantage they didn't have, but spoiling your children with material goods does little to help them understand the importance of limits and money management.
"If you can't afford it, it's crazy," Morin says.