Having Children

For most new or expecting parents, there are a host of new financial planning implications and less time than ever before to deal with them.  Although I can’t give you advice on sleep schedules or childhood allergies, I do suggest that you make the time to take the following steps to protect you and your family, keep financial stress to a minimum and remain on track to achieve the rest of your financial goals:

• Update your life insurance, critical illness insurance and disability insurance. The consequences of your disability, sickness or death now directly affect the life of your child and you will likely need more protection to provide for them and any stay at home parent.  Again, leaving life insurance to a trust for your spouse and children’s benefit can make the proceeds go a lot further than leaving it your spouse directly.
• Update your Will. Hopefully, your current Will (you do have one, right?) contemplates future children but if not, it needs to be redone.  Not having a Will when you have children can mean a lot of needless costs and taxes, as well as having the Public Trustee administering your child’s share of the estate until the child turns 19, after which the child can spend the rest on whatever type of sports car or  exotic vacation he or she chooses.
• Start RESPs. The Registered Educational Savings Plan can provide significant government matching (at least 20% up to set limits), tax-deferred growth and the opportunity for any earned income to be taxed in your child’s name on withdrawal, which usually means little or no taxes.  By putting money away early, the more time it has to grow and multiply, which hopefully means less for you to spend later.  There are other ways of helping pay for a child’s education, such as ‘in trust accounts’ or over-funding permanent life insurance policies on children’s lives but the 20% government matching is pretty hard to beat!  Other relatives may wish to help with RESPs or some of the other solutions, too.
• Consider life and critical illness insurance on your children. Although this may appear a bit ghoulish at first glance, there are some compelling reasons to look again.  As both life insurance and critical illness insurance are health-dependant, getting policies now might be the difference between getting coverage now or never.  Coverage is also age-related as well.  Accordingly, getting coverage now can lock in cheap rates for life so your children can have guaranteed affordable coverage to protect their future families.  As well, many parents may underestimate the impact the death or illness of a child can have on their own finances.  Critical illness protection on a child’s life can provide the money to provide the best in medical treatment, travel, a parent’s time away from work and modifications to your home, in addition to access to a preferred doctor’s network for some policies.  Life insurance can allow parents the time off to grieve or to cover some of the funeral or medical expense that might otherwise cripple a family’s finances.  Although not a pleasant topic, this type of coverage does serve to both protect your child’s future family and your own family right now.
• Update your budget in advance, especially if someone will go on parental leave or become a stay-at-home parent. By tracking your income and expenses, you can more clearly see the road ahead and take steps now to avoid being in a cash crunch later.  Although this may mean some unpleasant choice, there are sometimes some creative solutions that can minimize the impact and tax planning opportunities that make your dollars go further.
• Take steps to streamline your bills and savings by setting up automatic bill payment plans and automatic monthly contributions to savings plans. Your time will be at a premium and setting up automatic payments can help prevent things from slipping through the cracks.
• Start saving prior to the labour pains so you have a nest egg in place. As it is impossible to know all your costs in advance, I suggest the more the better, as this can help relieve some of the financial pressure and let you concentrate on being a parent.

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