Financial advice: Is it getting too expensive to raise a child?

Are you planning to have a child, or curious about the costs of having a child in today’s economy?

Having and raising children has always required some degree of planning and preparation. However, today’s rising costs make it increasingly challenging for many would-be parents to consider having a child or adding another member to the family.

Below, I’ll discuss some of the key expenses associated with having a child in Canada, offer some tips to help you prepare and budget for a new baby, and explain some of the benefits and tax credits available to new parents.

Having a child has become more expensive

In 2022, Canada’s total fertility rate hit an all-time low. The total number of children that women were giving birth to dropped from 2.13 in 1971 to 1.33 in 2022, according to a nationwide study by Statistics Canada.

Society has seen a lot of shifts since the 1970s. There are statistically more women in the workplace today, and the “nuclear family,” with the father earning a good living wage, while the wife stays at home as a full-time caretaker, has largely become an idea of the past.

Highlighting this, the proportion of dual-income families increased from 36 per cent to 69 per cent between 1976 and 2015, according to another income study by Statistics Canada.

One of the contributing factors to this is that the costs associated with having and raising children have become more expensive with each passing year.

Our universal healthcare system covers most medical expenses for expecting mothers, childbirth, neonatal, and maternal care. However, there are a host of other expenses that come with having a child, including:

• Formula and food
• Baby clothing and supplies
• Cradles and strollers
• Childcare and daycare
• School supplies

Increased costs of living

Another important factor expecting parents often need to account for is the need for a larger living space. If you’re adding a new child, you’ll typically want to have a separate nursery room. If you were previously living with roommates, you and your fellow parent may also want to get a place of your own.

As the cost of rent and housing continue to rise disproportionately to income, searching for a larger home or moving away from roommates could dramatically increase your living expenses.

High cost of childcare

Once your baby grows into a toddler, parents will also have to consider paying for childcare and daycare if they wish to go back to a regular working schedule or continue to pursue their careers.

Unfortunately, childcare has become incredibly expensive as well. For example, families in Toronto recently reported paying upwards of $1,685 per month for daycare.

Making it easier to afford a child

Having and raising a child has no doubt become costlier. However, there are some things that new parents can do to plan for starting a family that will make the process smoother and easier to afford.

Gradually purchase baby supplies beforehand

Create a comprehensive list of everything you need for your new child that includes everything from formula to clothes, strollers, baby strollers, and more.

Hopefully, your friends and family may help you with some of these expenses. Even if you have a massive baby shower, though, there still may be some items you’ll need to purchase for yourself.

Instead of waiting until the last minute, I suggest slowly purchasing some of your major necessities and stocking up on essentials months ahead of time. This way, you won’t find yourself in a financial bind trying to buy everything all at once.

Tax benefits and credits for new parents

The government provides a number of benefits and tax credits that can relieve the financial burden of raising children.

The Canada Child Benefit (CCB) offers monthly payments to eligible families with children under 18. Additionally, there are tax credits such as the Child Care Expense Deduction, which allows parents to claim childcare costs, and the Children’s Fitness and Arts Tax Credits, which offer savings on eligible fitness and arts programs for children.

Expand your emergency savings fund

One of the first pieces of advice that I give to prospective parents is that they should expand their emergency savings, especially if they want to extend their parental leave to spend more time with their new child.

Most financial advisors recommend that your emergency savings fund should be able to cover up to three months’ worth of living expenses. This fund will ensure that your bills stay paid in the event of job loss, injury/illness, or will be able to cover emergency car or home repairs.

Is it too expensive to have a child in today’s economy?

While it’s certainly become more expensive to have children in our current economy, I don’t believe that fact should be a dealbreaker for those who truly want to be parents.

That being said, it is a good idea to plan and prepare ahead if you do want children. The good news is that even if the unexpected does happen, you’ll still have plenty of time to prepare for the life changes coming your way.

Keep on reading to see some great tips from experts on how to increase your income.

Christopher Liew is a CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers at Blueprint Financial.

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