Raising A Child Costs $233000: TD Study

The costs of raising a child

Are you ready for the financial responsibilities of parenthood? Did you know raising a child can be as expensive as taking out a second mortgage on your house? Between diapers and diplomas, you could end up shelling out as much as $233,000, according to TD Canada Trust. From orthodontics, summer camp to post-secondary education, the expenses can really add up. The key is to plan ahead so you’re emotionally and financially ready before you bring home your bundle of joy.

Unexpected Child Expenses

Raising a child is expensive and it’s not getting any cheaper. The birth of a child brings new expenses you’ll have to budget for. Sports and extracurricular activities (30 per cent), vacations or summer camps (19 per cent), and clothing, toys and games (14 per cent) are among the top expenses that caught parents off guard.

“It’s important to work with an accredited advisor to create a long-term written financial strategy,” says Crystal Wong, Financial Planner at TD Wealth Management. “This strategy should align with your family’s goals. Things to consider would be your current household expenses, as well as potential expenses you’ll have over the years, such as sports, extra-curricular activities, education costs, summer camp, clothing, toys, and games. These expenses are all normal and above everyday household spending.”

Create a Budget and Stick To It

It’s more important than ever to create a budget when you’re expecting a child. “Take the time to create a budget that aligns with your broader financial strategy,” advises Wong. “That budget needs to capture the essential expenses like clothing and food, as well as discretionary spending like travel, treats, and sports costs. Revisit your budget every year to see what your plan looks like.”

Budget Extra Money For Extracurriculars

Children have a lot of passions. One moment they will be interested in piano, the next they’ll want to play hockey. This makes it challenging to budget for these unexpected expenses, but that doesn’t mean you should give up. “You should be able to associate the costs of what your child’s passions are and plan ahead. Some kids will attend the same soccer camps for two years, while others will attend for 10 years.”

Creating a budget is only half the battle. Sticking to it takes willpower and discipline. “The trick of sticking to a budget is tracking every single expense. The key to keeping on budget is discipline. Once you determine how much you have coming in to your household on a monthly basis, subtract your essential expenses, and what you’ll have left is what you can allocate for dictionary spending.”

The Power of Savings through RESPs

Your child may not yet know how to walk, but it’s never too early to start saving towards their education. The cost of raising a child doesn’t include post-secondary education. If your newborn child attends university away from home, you can expect to pay upwards of $150,000 by 2031.

“Growing children means growing costs,” remarks Wong. “It’s important to start early. Post-secondary education is one of the largest expenses associated with raising a child. If you plan early and take advantage of RESPs, you can reduce the financial stress of paying for school.”

“Your best option for saving for your child’s education is RESPs. For every $2,500 you save, the government contributes 20 per cent, up to $500 per year. That adds up to $7,200 of free money. Set up automatic savings and contribute on a monthly basis. This especially helps for budgeting because you’re planning ahead and saving on a regular basis.”

Similar to TFSAs, the money saved inside RESPs grows with tax benefits. “The great part about RESPs is that they grow tax-free and are taxed at the student’s income level, which is typically very low. Although there’s no tax deduction, but there also isn’t any income attributed back to the parent.”

Staying On Course

Life can bring a lot of ups and downs, so it’s important to stay the course to meet your financial goals. “Budgeting is a lot like dieting,” says Wong. “Even for discretionary expenses you need to reward yourself sometimes, as long as it’s in moderation. Talk to an accredited financial advisor. Each family has a unique situation and requires a personalized budget. With a good financial plan your family can be well on your way to financial success.”


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