Every September feels like a fresh start – kids are back to school, parents are back from the cottage, and a lot of those lingering to-dos start to get checked off the list. This is especially true for my husband Kevin and I since I’m seven months pregnant with our first child.
Kevin and I are the founders of estate planning platform Willful, a partner of Savvy New Canadians, and as we started to navigate all of the financial and non-financial tasks we needed to check off our list when baby arrives, we thought it would be helpful to share that list with any readers who are expanding their family.
You may not know about some of the government programs that exist to help new parents out, especially if you’re new to Canada.
New parents have a lot to contend with before their baby arrives, especially if it is their first child. You are thinking about the immediate needs for their wardrobe, nutrition, bathing, transportation (car seats!), and sleeping.
In addition to these, you should also start thinking ahead about how to secure their future. This includes ensuring they are protected if you pass unexpectedly, saving towards their college education, and more.
Read on for some top personal finance to-dos for new parents in Canada.
1. Update or create your will
Yes, we’re biased because we run an online will platform – but we’ve helped so many new parents with these important documents. We hear from parents all the time who say they’ve waited years to create their will, and it was a source of constant anxiety.
A will is a document that outlines who would care for your dependents if you and the other parent passed away, and who would get your assets, and it’s especially important to create or update a will when you have a child for a few key reasons:
- Assign a guardian for minor children: In the event that you and your child’s other parent passed away, your will outlines who would care for the child in your absence. This isn’t a fun one to think about, but it’s extremely important. If you don’t assign a guardian in your will, the courts will appoint someone after you pass, and it may not be the person you would have wanted. This can be someone in Canada, or someone in another country.
- Appoint your child as a beneficiary: Did you know that family law in Canada dictates that parents have a legal obligation to support any dependent children or spouses in their will? By creating a will and appointing a child as a beneficiary, it ensures you provide for them financially when you pass. It’s very common to leave everything to a spouse/partner in your will, and then to assign any minor child/children as a backup beneficiary (so they would receive an inheritance if both parents passed at the same time). In Canada, if you pass away without a will, a government formula dictates who gets your assets, and often this wouldn’t match up with what you would want (for example in Ontario, your assets would be split between a spouse and children, and the child’s assets would be tied up in a trust if they are a minor).
- Choose what age your child receives their inheritance: Kevin and I always joke that if we had been left a large inheritance at age 18, we definitely wouldn’t have spent it wisely (hello sports cars!). If you pass away without a will, your child will automatically get their full inheritance at the age of majority (18 in Ontario), whereas if you have a will, you can choose for them to receive it at an age where they might be more mature (for example age 21 or 25).
It’s also important to keep your will up to date as you have more children, or as you go through other life changes like marriage, divorce, or moving provinces.
Willful offers free updates for life, so you can keep your document up to date without incurring additional costs.
If you’d like to create your will online you can do so on Willful, and Savvy New Canadians readers get 15% off using code SAVVY15. Click here to get started.
2. Buy or update life insurance
Like a will, life insurance never benefits you; rather it’s designed to support the people you leave behind. Kevin and I purchased life insurance when we bought a condo since we wanted to ensure that if one of us passed, the other would have enough to pay off the mortgage.
But for many, having a child is the catalyst to take out a life insurance policy, since it ensures that if anything happens to you and the other parent, your child will be supported.
You can purchase life insurance in Canada via online platforms like PolicyMe, or through an insurance broker, and you can choose from term insurance (pay a monthly premium over a set period, typically 25 years, for a set amount of coverage for your beneficiaries if you pass away during the term); or whole life (a permanent policy – pay a monthly premium in perpetuity for a set amount of coverage when you pass away; this type of policy also has a savings component to it).
Many employers also offer a small amount of life insurance through an employee benefits plan.
Similar to a will, many parents list their spouse as the primary beneficiary, and their child/children as backup beneficiaries in case they both pass together.
If you already have life insurance, either personally or through your employer, it’s important to update your beneficiaries when a new child is born, so the policy reflects your current life situation.
3. Open an RESP
Free money! I probably have your attention now. If you’re not familiar with it, an RESP (Registered Education Savings Plan) is a government savings vehicle that allows you to save for your child’s education with tax-free gains, and to receive matching funds from the government.
You can open an RESP via online platforms like Wealthsimple, or with any financial institution, as soon as you have your child (fun fact: I tried to open an RESP when I was 23, and they informed me I had to have a child to open one. How rude!).
You can save up to $50,000 in this account, and the government will match up to $7,200, and anything you earn through interest or investment gains are non-taxable. This is a great way to save now to set your child up for success in the future. And again, free money!
4. Apply for the Canada Child Benefit
This is another “free money” task on the list, so it should be a no-brainer. The Canada Child Benefit is a monthly payment for new parents from the Canadian government that helps with the ongoing costs of raising children.
The amount you receive varies and depends on where you live, your household income, and other factors. But regardless of how much you receive, every little bit helps!
Similar to an RESP, you can’t apply for this benefit until your child is born – at that time, you can apply via your CRA online account, or when you register your child’s birth with your province.
5. Redo your budget and start/continue to build an emergency fund
Kids are expensive – so expensive the government gives parents free money to help out with costs! We don’t even have one yet and the amount of money we’ve spent on maternity clothes, fixing up the nursery, and baby supplies is overwhelming.
Kevin and I are redoing our monthly budget to account for costs like diapers, formula, clothes, and an RESP contribution, and we’ll also update it again when we find out how much we’ll receive from the Canada Child Benefit.
In the future, we’ll need to adjust our budget to account for things like daycare and other child care costs, since we both work. By planning ahead, we’ll have an accurate picture of how much our new addition is adding to our expenses on a monthly basis.
We’ve also started building an emergency fund using Moka, which automatically rounds up your purchases and invests the difference.
It’s an easy way to save because you really don’t notice the ongoing withdrawals from your bank account, and we’ve already saved about $400 in a few months.
This gives us the peace of mind that if there are unexpected costs, we’ll have the money to take care of it without compromising our cash flow.
6. Take care of the smaller financial to-dos
Those are the big ones, but here are a few other tasks you’ll want to check off your list when your baby arrives:
- Apply for a SIN card – you won’t be able to open an RESP for your child until you secure their Social Insurance Number, so this is a crucial first step
- Add your child as a dependent on any workplace benefits plans
- Update the beneficiary designations on any registered savings accounts (for example an RRSP)
- Secure a passport (this doesn’t have anything to do with your finances, but if you want to travel it’s an important one!)
- Create or update power of attorney documents to ensure someone is designated to make financial and healthcare decisions for you (you can take care of this on Willful when you create your will)
- Applying for a birth certificate
There you have it! Your complete guide to getting your finances in order when your new baby arrives. Hopefully, this financial checklist has saved you time so you can focus on what really matters: getting your family ready for a new addition!
This article was contributed by Erin Bury. Erin Bury is the co-founder and CEO of the online will platform Willful. She’s a first-time expecting parent who will be checking these tasks off her list when her baby arrives in November 2021.