7 Financial Tips For When You Start A Family

By Myles Leva


Last Updated: January 17, 2022


If you’re planning on starting a family, there are likely several thoughts running through your head.

There is a lot to be excited about, but there is also cause for pause. After all, starting a family is a huge investment in time and money.

When it comes to the money part, we can’t tell you exactly how much it will cost. However, we do fortunately have a lot of information on how much you should expect to spend.


How Much Money Should You Have Saved Before Starting a Family?

Raising a child from when they are born to age 18 costs approximately $14,000 to $15,000 per year. This is based on the total costs, divided by all 18 years, so you can’t expect annual expenses to be consistent.

In terms of statistics, this is a question that is hard to quantifiably answer with certainty. But there are a few pointers we can look to.

In Canada, estimates range from $10,000 to $15,000, with inflation-adjusted figures pushing that minimum to the higher end of that range. One 2011 article by MoneySense included work provided by a demographer to find a more precise figure.

In 2011, the figure was pegged at $243,660 upon age 18. In 2021, that would be adjusted to about $257,000.

In the US, the Department of Agriculture performed a different kind of study. However, the results proved quite similar.

In 2015, the average family would have spent $12,980 USD per child. In total, they pegged the figure at $233,610 USD for raising a child from birth to age 17. This figure is for a middle-income family with a married couple and two children. It covers food, shelter, necessities, and education expenses (not including college).

There have been several other studies undertaken in an effort to debunk these figures. But most studies fall into these ranges.

Read this next: 16 Smart Investment Choices to Set Your Family Up For Financial Freedom


How Do You Financially Prepare For a Family?

1. Understand The Costs

The first step is to understand the gravity of the financial commitment you are making.

You will likely end up spending $13,000 per year, though many parents spend significantly more or less. As an average family budget figure, this doesn’t cover anything not strictly necessary. In any case, it’s an ongoing expense that you need to dedicate the better part of 2 decades towards.

One thing this doesn’t cover, but which you must also be mentally (and financially) prepared for is the unforeseen.

Children can get in trouble, they can break things, and can generally incur all sorts of unforeseen expenses. You can’t be surprised by it. And while (most) healthcare is free in Canada, many healthcare-related expenses can also pop up.

So, to start, the first tip is to mentally prepare for both the predictable and unpredictable costs that are coming your way.


2. Saving

Starting a family means greater expenses and a greater need for savings.

Emergency savings are always a good idea for new parents. But in the context of starting a family, emergency savings are more important and demand greater savings.

No amount of preparation will save you from all surprises. So, saving ahead of the time you take on this new responsibility is a key step in adjusting to family life.


3. Use An RESP

Speaking of saving, a Registered Education Savings Plan (RESP) can make it easier.

Remember, the estimation provided above does not include the costs of any kind of tertiary education. So, if you want to include any education beyond high school in your financial plan, you need to add that to your calculations.

An RESP makes post-secondary education easier to prepare for by enabling the savings to grow tax-free. You can contribute to an RESP progressively as the funds grow without the burdens of any taxation.

In addition, the government can help through the Canada Education Savings Grant (CESG). The CESG is a grant deposited into an RESP. It could net you a maximum lifetime balance of $7,200 towards your child’s educational expenses.

4. Reduce Debt

Before taking on the responsibilities of family management, reducing debts is one of the best things you can do to make the job easier.

Of course, it’s really hard to remove all debts. Unfortunately, Canada is a country where both the government and households suffer from extreme debt, relative to most other countries.

While debt is a regular feature of Canadian life, it’s important to differentiate between good and bad debts. Much of the household debt covered extensively by Statistics Canada is mortgage debt. Mortgage debt normally carries low interest, however, and ends with borrowers owning a home.

When it comes to other personal debts, especially credit cards, you will want to get them under control. When taking on such a substantial financial responsibility as starting a family, you don’t want to maintain habits where you risk being charged such high-interest rates for missing payments.

In addition, it’s generally better to shed off as much debt as you can before starting a family. Removing the most costly debts should be the first priority.

5. Plan for Parental Leave

Don’t forgo maternity and paternity benefits. They can ease your financial burden and should be accounted for in your financial plan for starting a family.

The government will send you a portion of your regular income, up to a maximum of 55%. However, you may receive other benefits from your employer as well. These benefits, where applicable, can help you decide on the length of your leave.

The standard maternity or paternity leave is 52 weeks, but there are extended leaves that can be worth considering if your employer offers benefits in addition to the government support.

6. Estate Planning

When you’re planning on starting a family, it’s time to start thinking about estate planning.

Estate planning covers how you want your assets handled during medical emergencies or after death. It’s not a topic most people want to think about, but it’s an important part of securing a financial future for your family.

Estate planning includes:

  • A will
  • A living will
  • Power of attorney
  • Healthcare proxies

With these documents in order, you can be assured that your family can better adapt, financially and otherwise, to unforeseen circumstances.

7. Prepare to Slow Down Other Plans

Lastly, starting a family will normally require sacrifices. Starting a family is a big deal, and it will necessarily require a shift in your overall goal-setting.


Next Steps

Starting a family is expensive.

If you make the median family income in Canada ($90,390) as a couple), you will end up spending about a ninth of your combined income on each child you raise. This is a very financially significant change to go through, which is why planning is so important.

When you plan on starting a family, this is why it’s so important to focus on issues like savings, reducing debt, and other measures that ease the financial burden.

Photo by Jerry Wang on Unsplash


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