For many Canadians, entering into parenthood is not only an emotional roller coaster but also brings some trepidation about how to financially support a family in today’s economy. Couples who are planning a family need to prepare for more than the colour of the baby’s room. There are many expenses to consider from childcare to saving for University.
Parents need to factor in things like whether or not one parent will stay home with the child which would reduce the family’s income. And if both parents return to work after a maternity or paternity leave, what are the costs of childcare? The average price of childcare in Toronto is estimated at over $21,000 per year. In some cases, it may not be financially advantageous for both parents to be working and putting their child(ren) in daycare, especially with the rising costs of housing, food and household expenses. The Canadian publication MoneySense published an article in 2011 that estimated the annual cost of raising a child was $12,824 a year, which adds up to $243,656 over 18 years. That figure was updated in 2015 to reflect inflation, bringing the annual average to $13,366. And the numbers continue to climb.
When planning for a baby, parents need to budget for necessities like a crib and stroller, and plan for ongoing costs like diapers. Also, parents should set a budget for future expenses, like university or college, and ensure they are filing their taxes each year in order to claim things like childcare expenses and summer camp.
Childcare expenses encompass any care for a child so the parents can work during the year or summer. For example, a home daycare or daycare centre is considered a childcare expense. A summer day camp or PA day camp is also a childcare expense because the parents need to find care for their child(ren) while they are working. Sleepover camp is capped at $125 per week and there are larger deductions for disabled children. A music or sports lesson that may occur one hour a week is not considered childcare.
When filing your taxes, the lower income earner will complete the section on childcare. The only time the higher wage earner may claim childcare expenses is if the spouse is attending university, is mentally/physically infirm, or if they are a single parent and are separated. For more information on how to file childcare expenses on your taxes, it is best to consult with a Chartered Professional Accountant.
Preparing for parenthood involves much more than choosing outfits and baby names. Being on top of your game financially will alleviate a great deal of stress and put the focus where it should be: on your new, growing family.