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The high cost of raising kids

The high cost of raising kids

By Carla Hindman, Director of Financial Education, Visa Canada

The idea of what it costs to raise a child has been hotly debated in Canada in the past year. While some estimates have suggested $15,000 – 20,000 annually, last summer the Fraser Institute suggested that an annual cost of $3,000 to $4,500 is a more realistic figure. That report attracted a lot of attention, because it didn't account for the cost of daycare, or lost income from one parent staying at home.

Regardless of your personal income, childcare situation, or lifestyle – there are a few steps you can take, from birth through high school, to help ensure you'll be able to afford your bundle of joy:

Create a "health budget": While the cost of childbirth is covered in Canada, there may still be extra costs from doctor's offices and hospital stays, and various other items that are not covered. If you have private health insurance, find out in advance what your insurance plan will and won't cover. And learn if, and how much, your insurance premium will increase for family coverage.

Know what things cost: Another shocker is how many expensive "things" babies need. You could easily spend thousands of dollars on a new car seat, crib and bedding, stroller, diapers, baby formula and food, medical and grooming supplies, clothing and so on.

Instead, form a network of parents to swap hand-me-downs and start haunting consignment shops. More importantly, develop a budget and start saving right away. Visa Canada's free personal financial management site, Practical Money Skills, offers a ‘Budgeting for Baby' calculator to help you estimate and plan for some of these costs.

Child care: investigate your options early. Depending where you live, daycare spots might be hard to come by, and may also have costs that can vary wildly. A little research, even before the baby arrives, might be well worth your while.

Financing post-secondary education: It's never too soon to start saving for your child's education. In Canada, you can start a Registered Education Savings Plan to save for your child's education. While contributions to RESP's are not tax-deductible, RESPs do offer tax deferral, which means that interest income and investment growth earned within an RESP are not taxed as long as the funds remain in the plan. Withdrawals from an RESP are taxed in the hands of the student, which usually means they pay little or no tax. In addition, through the Canadian Education Savings Grant program, the government matches 20% on the first $2,500 contributed annually to an RESP.

You can learn more about RESP's from your bank, or you can visit the Government of Canada's CanLearn site ( for more information.

Raising a family is one of life's most rewarding experiences. Just be sure you plan carefully for the financial bumps in the road.

This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.

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