While expecting a child is exciting, it’s a good idea to take stock of your financial situation and plan accordingly
Otherwise, you may end up taking on excessive debt while you’re on parental leave or allow smaller existing debts to snowball. Here’s a guide to preparing for this key time in your life.
WHY YOU NEED TO SAVE MONEY
In a nutshell, planning ahead is important because, when you go on parental leave, your income shrinks considerably. Standard parental benefits will provide you with 55% of your insurable earnings for up to 40 weeks at a maximum of $562 a week. This is the same as maternal benefits, except these are only available for 15 weeks.
The extended option provides up to 69 weeks of paid leave but at a rate of 33% of insurable earnings up to a maximum of $337 per week.
On the other hand, having a child will involve many new expenses. This discrepancy between having a reduced income and increased expenses is why many people end up taking on debt while on parental leave, and why some people simply don’t think they can afford it.
DO YOUR HOMEWORK
Beyond federal parental benefits, find out what you and your partner (if applicable), have access to in terms of benefits. Some group benefits provide a parental top-up. In addition, some families may be eligible for a child tax benefit. If you already have smaller debts, such as student loan debt or credit card debt, it’s best to meet with a licensed insolvency trustee who can advise you on the best way to manage it before it snowballs.
PREPARE IN ADVANCE
If at all possible, start saving a year in advance of your anticipated due date. Add a new savings category to your budget and don’t touch the funds until the baby arrives. A good trick is to deposit the money in an account separate from your chequing account. If your debt obligations are preventing you from saving money, consider speaking to a debt counsellor.
CHANGE YOUR FINANCIAL HABITS
One way to help you save and prepare you for the financial realities of raising a child is to change your habits. Even if the pregnancy is unplanned and you didn’t have time to prepare, these changes can help you stay afloat.
Prioritize. Make a list of your expenses and prioritize the essential ones such as utilities, food, medication and rent or mortgage.
Cut expenses. Eliminate any unnecessary expenses such as those for streaming services, subscriptions and other extras.
Secure income. While you may have to spend your time at home, this doesn’t mean you can’t work at all. There are many things you can do to earn money from home part time, such as freelance writing or graphic design. However, keep in mind that there is only so much money you can earn before the government will deduct a portion of your payments.
WORRIED ABOUT DEBT? SPEAK TO A LICENSED INSOLVENCY TRUSTEE TODAY
Whether you’re in the early planning stages or scrambling to deal with debt, D. & A. MacLeod Company Ltd. can help. We have eight offices across Eastern Ontario and all you need to do is give us a call to schedule your free consultation.