The responsibility of raising tiny humans is daunting enough, but the pressure to provide a good life for your kids, in a time when everything feels expensive, adds an extra level of stress.
Whether you have a family or are planning to start one in 2022, making a plan can alleviate some of the anxiety.
These resolutions will help you reach the financial milestones — and handle the curveballs — you’ll encounter while growing a family.
1. Create a family budget
Creating a budget that encapsulates income and expenses for everyone in your family will help you track of spending and save for goals. A family budget might involve a little guesswork if you’re newly married or expecting another child, but that shouldn’t be a deterrent. There are multiple approaches you can take when creating a budget; play around and decide which one works best for your habits and lifestyle.
» MORE: How to budget your money
2. Pay down your debt
Covering the costs of a growing family is even harder if you’re dealing with debt, especially if it comes with a high interest rate, like credit card debt.
Two popular strategies for shrinking debt are the snowball method and the avalanche method.
- Make a list of all your debts in order from the lowest to the highest.
- Make the minimum required payment on all debts.
- Put any extra money you may have towards the smallest debt.
- Once you pay off the smallest debt, you move onto the next lowest and so on.
The idea is that by tackling the smallest debts first, you’ll get a sense of accomplishment that will motivate you to keep going.
- List all your debts in order starting with the one with the highest interest rate.
- Pay the minimum balance on all debts.
- Put any extra money towards the debt with the highest interest rate.
- Once you pay off the most expensive debt, move to the debt with the second-highest interest rate
The idea is that by tackling the debt with the highest rate first, you can avoid paying as much in interest, freeing up money that can then be used to pay your other debts.
3. Build an emergency fund
An emergency fund is an essential way to prepare for unexpected expenses — something that’s all too common for growing families. It’s recommended that an emergency fund have enough money to cover three to six months of living expenses should you lose your job or be unable to work for some reason. But don’t let that recommendation frighten you — start by setting a goal of $500 for your emergency fund, and then make additional contributions as often as you can.
» MORE: How to save money
4. Look into life insurance
Life insurance compensates your loved ones and dependents in the event of your death. If your salary plays a big role in paying for family expenses, and it’s possible that loss of that income would leave your family financially insecure, life insurance may be something to consider.
There are two main types of life insurance: term and permanent. Term insurance only lasts for a specific period of time. For example, 20 years. So if you pass away within that term, your chosen beneficiary will receive compensation. If the term expires and you don’t renew or replace the policy, beneficiaries receive nothing.
Permanent life insurance, on the other hand, covers you throughout your lifetime. This means your beneficiary will receive compensation if you pass away at any time, as long as the policy is current.
Both options have pros and cons, but the most important thing to consider are your dependents and the kind of financial support they might need should you die. Factors like the age of your children, your net worth and your partner’s income will also influence your decision.
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5. Claim tax incentives and other assistance
The Canadian government offers programs and tax incentives for new parents and families. These include:
- Employment Insurance (maternity and parental benefits)
- The Canada Child Benefit
- First-Time Home Buyers Tax Credit
Knowing how these programs work and eligibility requirements is the first step toward taking advantage of all the financial benefits they can offer.
6. Invest for future education
One of the costs parents tend to worry about the most is post-secondary education. No one wants their child to be strapped with student loan debt, but universities and colleges aren’t cheap, and tuition continues to increase in price every year.
To help with education costs, consider opening a Registered Education Savings Plan (RESP) in your child’s name. An RESP allows family members and friends to save up to $50,000 total over the course of the child’s young adult life (it can stay open up to 36 years). Additionally, you can use the Canadian Education Savings Grant (CESG) to boost those savings. Under the CESG program, the government will contribute a lifetime maximum of $7,200 to a child’s RESP account.
7. Save for retirement
Saving for retirement is something that every working Canadian should start to do as soon as they can.
Contributing toward your retirement goals on a regular basis helps you — by giving you more choice about how to spend your golden years — as well as your children. If you have ample retirement savings, they’ll have less to worry about while working to advance their careers or start their own family.
8. Create an estate plan
Every adult should have a last will and testament, but it’s especially important if you have children or are thinking about starting a family.
A will makes the financial consequences of your death more manageable for loved ones and dependents, especially if you pass unexpectedly. If you die without a will, your assets will be divided based on the estate laws of the province or territory in which you lived, which may not align with your wishes.
But estate planning involves more than just writing a will.
You’ll also want to examine your beneficiary choices, name an executor of your will and potentially award power of attorney. Making advance funeral arrangements, setting up trusts for dependents, and selecting guardians for your underage children and pets are also important components of a comprehensive estate plan.