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The Cost of Raising a Child in Canada

By September 21, 2017 January 27th, 2021 Article
cost of raising a child in Canada


By Barry Choi | Family finances, Personal Finance

I’m at the age now where all my peers are having children. Friends who were never active on Facebook or Instagram all of sudden have plenty to share. I’m happy for you, I really am, but forgive me, I’ve probably turned off your status updates.
Beyond the likes and retweets, the cost of raising a child in Canada is expensive! It’s generally estimated that raising a child will cost you $10-15,000 a year until the age of 18 in Canada. I have no idea if that’s an accurate number, but what I do know is that there are many costs and expenses to think about when having a child.

Maternity employment insurance

Maternity leave in Canada covers 17 to 52 weeks, during this time your employer must save your position. If you’re lucky they’ll offer some kind of top up, but if not, maternity employment insurance will help you get by. Employment insurance is meant to replace 55% of your weekly earnings up to a maximum of $543 a week. You’ll hit the cap if you’re salary is $51,300 or more. To make matters worse, the income is taxable.

Officially, mothers get 15 weeks of maternity employment insurance. Another 35 weeks can be shared / taken by either parent where EI parental benefits will still be paid out. Most couples choose to take the leave one after the other but you could take it at the same time if you wanted. The remaining 2 weeks is unpaid so make sure you have some reserve funds.

Whoever has the better top up benefits should take more time off, but try telling that to the woman who just carried and delivered a baby.

Life insurance

Once you have dependents, life insurance is an absolute must. Our children depend on our income to get by so have a policy in place that will leave them with enough money to get by until they become self-dependent adults.

If you’re young and healthy, term life insurance is affordable at roughly $30-40 a month. Generally speaking, the amount you want to get enough to cover the costs of your funeral, the balance of your mortgage, and the cost of a post-secondary education. Since I’m being all morbid, don’t forget to get your will done. Do-it-yourself kits are tempting but I recommend finding a lawyer so your will is done properly.

Registered Education Savings Plan

Setting up an RESP isn’t mandatory, but I would consider it a cost of raising a child in Canada. You can get $500 free every year through the Canadian Education Savings Grant. The grant gives you a 20% match on the first $2,500 you save every your child turns 17 with lifetime maximum benefit of $7,200 per child. Contributions aren’t tax-deductible but any gains are tax-free.

Lower-income families could potentially get a higher match and they can access up to $2,000 to help kick-start their child’s RESP through the Canada Learning Bond. The money is completely free; no fees and no additional contributions are required.

Daycare costs

Where you live will determine your daycare costs. Licensed daycare in major cities can cost up to $2,000 a month. Unlicensed home care is a cheaper solution and is worth checking out. Regardless of which route you decide on, there are limited spots so put your child’s name on a waiting list as soon as they are born.

With the cost of child care so high, it might even make sense for one parent to stay home for an extended period.

Final word

Having a baby is a serious decision and one that should be made with our finances in mind. Most parents will divert all their savings towards their children but it’s foolish to ignore your own retirement savings in the process. The last thing you want is for your child to be part of the sandwich generation.

The cost of raising a child in Canada is offset by the Canadian Child Benefit which provides up to $6,400 per year ($533.33 per month) for each eligible child under the age of six, and up to $5,400 per year ($450.00 per month) for each eligible child aged 6 to 17. The amount you get is based on your income so it’s possible to get $0. In addition, some families may also qualify for the Canadian child tax benefit which is a monthly tax-free payout. You should apply for these benefits as soon as your child is born.

By Barry Choi | Family finances, Personal Finance | March 23rd, 2017
The information contained is as of date of publication, and may be subject to change. These articles are intended as general information only.
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