Having a baby is one of the most exciting and important
experiences in your life. As you embark on this new adventure of parenthood,
you’ll face a lot of changes – physical, emotional and financial.
While you can’t plan for every eventuality, you should take a serious look at
the impact that a baby will have on your life before you get pregnant. It makes
sense to do some financial planning and get a handle on your budget before a
baby comes along, so you’re prepared for the adjustments that lie ahead.
| • | How will a baby affect your financial
situation?
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| • | Can you manage on a reduced income
during maternity leave?
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| • | Will both parents return to work? Full
or part-time?
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| • | Will you need childcare? How much will
it cost? Can you afford it?
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| • | Is there room for a baby in your home?
Do you need to move or renovate to accommodate a child?
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| • | How much ‘baby gear’ do you need to
buy? Can you afford the ongoing expenses of raising a child?
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| • | Start by
creating a budget. Write down your current expenses and income. Are you
spending more than you earn? If so, you may want to reduce your expenses and
try to save some money before your baby comes along.
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| • | Plan for the future.
Try to estimate the expenses associated with having a baby and raising a
child. Consider everything from the cost of diapers to the cost of future
education. Make a new budget or spending plan that incorporates these added
expenses.
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| • | Review your income.
Investigate your employer’s
maternity and paternity policies. Most policies require some reduction
in income for at least part of the leave. It’s difficult to manage on a
reduced income, even for a few months. If your income is going to drop
during your leave, or if you’re going to temporarily or permanently change
from a two-income to a one-income family, try and save as much as you can
before becoming pregnant.
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| • | Reduce your debt. Pay
off high-interest credit cards and reduce or eliminate loan payments to help
free up money in your budget for child care expenses.
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| • | Be realistic when you go
shopping. You don’t need to spend a fortune on baby equipment and
clothes. Most baby necessities are expensive and you only need them for a
short time. Instead of buying everything brand new, borrow some of the items
you need or buy them second-hand at thrift stores and consignment shops
(these are great sources of gently-used maternity clothes, too!). Your baby
will never know the difference and you can put the money you save to good
use.
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| • | Buy
life insurance. Once your baby is born, you and your spouse will need
some type of insurance to protect your child if something happens to you.
You also may want to consider disability insurance, in case you have an
accident or are disabled at work.
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| • | Make a
will and set up a power of attorney. These important legal documents
will ensure that your child is cared for according to your wishes, if you
should die or become incapacitated. Make sure you update your insurance and
retirement policies to include your child as a beneficiary.
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| • | Plan for your child’s
education. Education costs are continually on the rise so, the
earlier you start to save, the better. Talk to your bank or financial
advisor about setting up a Registered Education Savings Plan (RESP) for your
child. Grandparents and other friends and family can also contribute to an
RESP, which will help to grow your education nest egg.
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