As soon as she got pregnant just over two years ago, Sandra Hanna and her husband Jason started scrutinizing their spending, slashing extras such as lunches out and new clothes, and began socking money away to cover the looming expenses of a maternity leave and daycare. “We had a moment of panic where we wondered if we could afford to have a child—we had just bought a house and we were used to having money to go out and enjoy life,” says Sandra.
That kind of panic is understandable. After all, it costs $5,000 to prepare for the arrival of a baby, according to a 2013 report by Scotiabank. And that’s small change compared to the total cost of raising a child to age 18, which is a whopping $243,660, according to a 2011 analysis by MoneySense magazine. Sandra, one of the five founders of Smart Cookies, an online business that offers its 50,000 subscribers advice for living debt-free, says she sought in vain for a good resource for new parents on how to create a realistic spending plan. Now she’s writing one. It’s called The Lift: An uplifting money manual for new and expecting parents and will be launched on the SmartCookies.com in 2014. She says one of her strategies for saving on baby gear was creating a list of all the experiences she and her partner were looking forward to when their son Jack, now 18 months, was born – things like having him meet his great grandparents. “We got excited about the experiences we’d share instead of the stuff we might buy. That helped keep us focused.” Sheila Walkington, a certified financial planner and co-founder of Vancouver-based Money Coaches Canada, says many new parents get into financial difficulty right at the start because of the income they lose during parental leave. “If you work full time, you’ll get 12 months off but you’ll have to live on about half your regular salary – lots of families go into debt that first year.”
Sheila and Sandra offer these tips for budgeting for baby:
- Make it through your mat leave. Examine all your spending categories, cut back wherever possible and start saving far in advance of your due date so you won’t be stressed out by lack of money. If you have to, you could always reduce your mortgage payments or put a hold on your RRSP contributions.
- Take the ding out of daycare. Daycare can average $1,000 a month or more. Investigate nanny sharing or staggering work schedules with your partner to save. Perhaps a doting grandmother could provide care one or two days a week. Remember that daycare is a tax deductible expense and the spouse with the lower income can claim up to $7,000 per year.
- Resist the urge to overdo the nursery. The nesting instinct can cause you to go overboard on frills like pre-packaged crib bedding sets, fancy changing tables and an elaborate themed decor. Keep it simple and look for items that do double duty. “Instead of a changing table, buy a dresser that can later be used as a piece of furniture – just put a changing pad on top,” says Sandra. A crib that converts to a bed is another option.
- Be savvy about saving on the essentials. Breastfeeding as long as possible can save thousands on formula. Try buying diapers in bulk and sign up at the diaper manufacturers’ websites for discount coupons.
- Search out deals on baby gear. Sure, there may be a couple of items you should get brand new (like a car seat and maybe a stroller), but as for others, think twice before you buy. Purchase items secondhand, ask for them as gifts (register!) or connect with parents of older children who might pass along their used baby items. Rotate clothes, toys and baby gear among other parents, especially items that a baby outgrows quickly.
- It’s never too early to save for your child’s education. The sooner you start putting money in a Registered Education Savings Plan (RESP), the less painful it will be when you have to shell out thousands for university tuition. Contribute the $100 Universal Child Care Benefit that the Canadian government gives to families each month for each child under six to the RESP.
- Toys, books and activities. Use the library, hit garage sales, ask friends for hand-me-downs and don’t underestimate the fascination a baby may have for playing with a simple household object such as a box or wooden spoon.
- Have a financial plan. Meet with a financial planner who can help you create a budget that works for your growing family. And continue to keep track of your expenses – Sandra recommends using mint.com. “It’s an online resource that automatically connects with your bank account and gives you a snapshot of where your money is going.”