By Christine Van Cauwenberghe
Special to Financial Independence Hub
May marks the arrival of Mother’s Day, a time to recognize the influence and sacrifice that comes in tandem with motherhood. While the old adage of “parenting isn’t easy” rings true, the financial planning component doesn’t have to be hard. Childhood is a series of stages woven together: each brings a new opportunity for parents to maximize key fiscal benefits and underpin good financial habits for the next generation.
Before your baby is born, there are pre-emptive financial strategies that you can implement to get your affairs in order. Firstly, you want to arm yourself with knowledge. Get informed about the benefits provided by the government and your employer to determine what your expected income will be while on parental leave. Take time to research childcare costs and calculate whether you have adequate life and critical insurance.
Most importantly, make sure you have a will in place that designates a guardian to care for your minor child, a trustee to manage the money for your child and an executor who will run the administration of your estate. Finally, review your financial plan with your advisor to account for the addition of a new family member.
Infants and Toddlers (0-5 years)
There are a series of government benefits available for parents with young children. In most provinces, you can automatically apply for a Social Insurance Number and the Canada Child Benefit (CCB) when you register your child’s birth. The CCB is a tax-free monthly payment made to eligible families to help with the cost of raising children under 18 years of age.
You should also consider opening a Registered Education Savings Plan (RESP) to help save for your child’s education. To this same point, you may be eligible for a Canada Education Savings Grant, which provides a 20 per cent grant to be paid on yearly contributions up to an annual limit of $500 and a lifetime limit of $7,200. Your family may qualify to receive the Canada Learning Bond based on your family income and other benefits under a provincial education savings program. You may also be able to claim childcare expenses if you (or your spouse or partner) paid someone to look after an eligible child so that one or both of you could work or attend school. Talk to your financial advisor about the options available to you.
Middle Childhood (6-11 years)
While they may not have a wealth of knowledge yet, children at this age can understand basic money concepts and can start developing good habits. Consider opening a savings account for your child and encourage them to make deposits from allowance, holiday or birthday present money.
Teenagers and Adolescents (12-19 years)
At this stage, the Mirror-Window Effect is at its peak. Mirrors offer reflections, while windows open up new views. By practicing wise money management, you can be the mirror your child needs to develop early but strong financial habits.
By talking to your child about loans and debts, you can teach them new information about the difference between good and bad credit. If your child is getting ready to pursue a post-secondary education, speak with your financial advisor about RESP withdrawal options. You should also be reviewing your financial plan, will and insurance needs.
Young Adult (20-25 years)
By this point, you’ve hopefully given birth to a financially savvy kid and now it’s time to pass the baton. Set up a meeting with your advisor and your child, so the former can help the latter create an individualized plan that aligns with their long-term financial goals.
Few things in life bring instant gratification and rearing children is no exception. It’s all about playing the long game; taking small steps at each stage of your child’s life to create a big picture that’s coloured with success. Parenthood is filled with all sorts of pivots and unpredictability, but financial planning can eliminate some of the guesswork – and some of the greys.
Christine Van Cauwenberghe is the Head of Financial Planning at IG Wealth Management. She oversees the division’s three teams: the advanced financial planning group, comprising the firm’s 40 tax and estate professionals; IG University, the firm’s advisor training group; and the financial specialist network, a team that will coach advisors of high-net-worth (HNW) clients. Van Cauwenberghe is also a member of the Canadian Tax Foundation, has her CFP designation, is a registered retirement consultant, and is certified by the Society of Trust and Estate Practitioners.