Morgan & James: With our first child on the way, we are curious about the advice you have for new parents when it comes to personal finance.
John: I’ve been operating in the financial services industry for almost three decades now. Most people would assume that my advice would be to exert more energy on personal finance in child rearing years. Especially since this is a time where people are at the lower end of their career earning potential and having children is not cheap. But I am also a veteran when it comes to being a father and I understand the demands of family outside of money.
I think it’s important for parents to remember there are only so many hours in each day. Focusing too much energy towards money can come at the expense of not attending to those that mean the most to us. On the other hand, stress can be created within a family unit if responsible attention is not allocated to personal financial planning. Finding a balance is the key. The best approach to reducing the stress around personal finance is to have a financial plan in place that you review annually.
In the next section you will find a list of things Connor and Lindsey did financially during their first year as parents. This list will not suit your situation perfectly but I hope it helps start some conversations at your next financial planning meeting.
First Year As Parents – Connor & Lindsey
I. Long-Term Investment Contributions – As new parents we received a lot of good advice from veteran parents leading up to the birth of our son, Wesley. One piece that we heard often was to enjoy your children when they are young. This piece of advice resonated with Lindsey and me. We decided that our objective for 2016 was to enjoy the first year of parenthood and not stress about money. This is easier said than done.
So, what did we do? We decided to stop our long-term investment contributions for one year until Lindsey returned to work. Our financial plan deals with the next 60-70 years of our lives. We felt that one year without a long-term investment contribution was quite minor when looking at the big picture. We are happy to report that it was a fantastic year filled with only minor money frustrations and only a small change to our standard of living. Lindsey has recently returned to work and we are now back on track with our long term financial objectives.
II. EI Maternity & Parental Benefits – We applied for these a month before Lindsey’s due date. It was nice to get the application out of sight and mind before Wesley was born. Application link: Click Here
III. Education Savings – Since Wesley’s birth we have contributed money to his RESP to take advantage of the Canada Education Savings Grant and SAGES. We hope to max out this plan over the next 17 years. Please see our previous post for more details on these plans. (Click Here)
IV. Insurance for Parents – We reviewed our life, disability, and critical illness insurance to ensure that we were satisfied with our total coverage. We both ended up leaving our critical illness and disability coverage unchanged. Additional life insurance was applied for, to replace each of our incomes for 20 years. The idea is to ensure that our household is financially taken care of until Wesley reaches an age where he can be independent.
V. Insurance for Children – We decided to obtain a child critical illness policy for Wesley. We hope to never claim on this policy, and at age 20 Wesley can cancel the contract. The policy returns 100% of the premiums paid into the policy in the 20th year. He can use the money to fund his financial goals at that time.
VI. Will & Power of Attorney – We visited our lawyer Bob Braun to have these documents created. Bob has been advising our business, and our clients over the past three decades so we felt comfortable having these conversations with him. Our main concern was setting up guardianship for Wesley if something were to happen to Lindsey and me. The life insurance mentioned above will provide financial support to the guardians if Lindsey and I were to pass away.
VII. Canada Child Benefit, Social Insurance Number, Health Card, and Birth Certificate – Mother Baby Unit staff members helped us apply for all of these items before we were discharged from the hospital. It was nice to have this finalized before heading home. The child tax benefit is paid to us tax free each month. Link for more information: Click Here
VIII. Daycare – Shortly after Wesley was born we started to research daycare options. It took us four months to find one that we felt comfortable with. Wesley started daycare last month as Lindsey returned to work. These expenses will be deductible on our 2017 tax return.
IX. Cake Mix – We bought Betty Crocker cake mix for Wesley’s first birthday and watched him eat and roll around it. Worth every penny.