Winnipeg Free Press - PRINT EDITION

Making the budget work with baby

Raising a child is expensive, so it's wise to plan and be aware of the credits

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Plan as they might, Matt Solvason and Anabela Lopes couldn't quite prepare for a life-altering event earlier this year.

The birth of their first child, Charlotte, about five months ago involved more than its fair share of preparation: reading books and blogs, writing lists, minor renovations, purchasing baby gear and a lot of budgeting.

Yet it's hard to be truly ready for the real thing, that squirming bundle of joy -- and occasional anxiety.

"It's a definite eye-opener. People tell you what it's like but until you actually experience it you can't appreciate it," says Solvason, 40. "Priorities change."

For many parents, those new priorities include the financial considerations associated with raising a child. It isn't a low-cost affair.

A recent study by TD Economics shows parents can spend as much as $233,000 on food, shelter, clothing, transportation and recreation on a child born today until age 18.

Yet most new parents aren't prepared for the financial impact of raising a child, says Shawnnette Fraser, with TD Canada Trust.

"Even if we look at Manitoba, about 57 per cent of parents say they're not prepared for all the costs of raising a child," says the Calgary branch manager, citing a recent survey.

That wasn't the case for Lopes and Solvason, a chartered accountant.

"I definitely know how to budget for things, and that's what I would recommend people do; prepare an estimate of what you expect to incur so you don't get sticker shock when you go to the store," he says.

To save cash, the couple relied heavily on second-hand items, from clothing to a crib.

"You could buy the Rolls Royce of cribs, but do you really need it?" he says. "Why not go on to Kijiji? I've seen a lot of stuff given away for free."

Baby blogger and Winnipeg mom of two young children, Emma Durand-Wood, says finding used items also helped her and her husband Michel cut the cost of caring for two young children.

"The way we see it is, first of all, why buy something brand new when you can get something used that is perfectly good and functional?" says the mother of an infant and a toddler.

She adds finding ways to cut costs is especially important during that first year, when income is reduced.

While on maternity leave, Durand-Wood says her income dropped by about 60 per cent because employment insurance benefits only replace up to 55 per cent of insurable earnings to a maximum of $47,400, or $501 a week for parental leave.

Despite the decrease in cash flow, they made the family budget work.

"We found that there were a lot of things that just naturally changed when we had kids," she says. "We weren't going out nearly as much so that can saved a lot of money."

The couple also saved money using cloth diapers instead of disposables. While it involved spending about $500 up front, they estimate they will have spent a few thousand dollars more on disposables by the time their second child is potty trained.

Having children has also meant they've had to adjust their work schedules. When one parent works, the other is at home with the children.

Like many parents, they did a cost-benefit analysis of whether the money spent on daycare would be substantially more or less than the additional income they would earn both working full-time. For them, a reduced work schedule for Durand-Wood has been the way to go.

"We do earn less income this way, but we decided it was worth it."

Yet the financial considerations involved with raising children extend beyond adjusting the family budget to make room for the expenses of early childhood.

New parents also should brush up on their knowledge of the many government programs that can put additional cash in the piggybank, including the Registered Education Savings Plan, or RESP.

Fraser says the RESP allows parents, family and friends to contribute toward a child's post-secondary education. The growth on the contributions grow is tax-deferred, and the federal government also offers a substantial grant.

Yet surprisingly, many Canadian parents don't take advantage of the plan, she says.

"They're really missing out on one of the best savings opportunities available in Canada," Fraser says. "They can receive at least up to $7,200 in grants over the lifetime of the RESP."

Solvason says he wanted to start an RESP the day his daughter was born, but he had to wait several weeks to set up the account because she needed a social insurance number.

"The government has tried to make it simpler, where you fill out one form at the hospital for the social insurance number (SIN) as well as register at Manitoba Vital Statistics for a birth certificate," he says, adding the birth certificate is required to get the SIN.

The form also automatically enrols newborns in federal programs, including the universal child-care credit -- $100 a month until age six -- and the child tax benefit, he says.

Unlike the other programs, the RESP is an optional government plan, yet it shouldn't be ignored, in Solvason's opinion.

"It's potentially our money as taxpayers, so why not put it back in your pocket for your child, because it's going to be spent on education one way or another anyway?"

After all every dollar helps, but good planning ensures each dollar actually counts, he says.

And planning doesn't just help pad the bank account. It provides peace of mind, too, which is equally if not more important, Solvason says.

"Having a child is stressful, and every little bit that adds to that stress isn't fun, so the last thing you want to worry about is how to pay for something."

Republished from the Winnipeg Free Press print edition December 28, 2013 B12

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