Raising a family is major life goal for many, but the potential costs can seem overwhelming to aspiring parents-to-be. But how much does it really cost to raise a child in Canada?
Most estimates peg the cost of raising a child in Canada at $250,000 from birth to age 18. This works out to approximately $10,000 to $15,000 per year.
The first five years of raising a child are generally the most expensive, because of childcare and the investment in big ticket items like strollers and car seats.
How expensive are kids?
Some people will tell you kids are as expensive as you make them, but that isn’t true. Pretending having a family isn’t a major financial undertaking does aspiring parents a disservice. It’s better to know the financial impact of having children so you can plan appropriately!
As a general rule of thumb, you should expect to spend approximately 30% of your income on raising children, regardless of how much or how little you earn. No matter what your annual salary, having a child usually inflates every area of your budget, and 20% to 30% is a good estimate.
When it comes to the costs of raising children, people tend to think only of specific expenses for the child, but there are “hidden” costs that are fairly large. For example, you will likely choose a larger home with more rooms than you would if you were a childless person, and this results in higher shelter costs. You won’t think of your housing as an expense of raising children’s, but part of it is!
How much does it cost to raise a kid per year?
Childcare – $15,000 to $25,000 per year
Childcare is likely to be the biggest expense to your family budget, especially before your child starts school. Depending where you live, your monthly daycare fees will run anywhere from $500 to $2,000 per month. If you choose to higher a private nanny, expect to pay anywhere from $1,800 to $3,000 per month.
You will pay for full-time care from the time you child is 1 year old until they are 5 and begin school. From ages 5 to 10 or 12, you will pay for part-time or after school care.
Having one parent stay home is not saving money, its offloading 100% of the childcare costs onto one person. When one parent stays home, you’re not “saving” any money on childcare, you’re making it cost the annual salary of the parent who is no longer working while causing long-term damage to their career. There are a lot of very good non-financial reasons to take time away from the workforce for child-rearing, but don’t be under the impression that it saves any money!
RESP contributions – $2,500 per year
Many people worry about saving for their child’s post-secondary education, but it’s fairly affordable. Granted, after the cost of childcare, every expense feels affordable!
Ideally, you will be saving for your child’s post-secondary education with a Registered Education Savings Plan (RESP). You should strive to save at least $2,500 per year in order to maximize the Canada Education Savings Grant (CESG). The CESG is a government match of 20% to a maximum of $500 per year. It is literally free money to help you save for your child’s post-secondary education!
Clothing – $500 to $1,000 per year
Children’s clothing is extremely affordable. The problem is they grow so fast you have to buy clothes often!
Choosing secondhand clothing is often better than buying new, but it won’t save you a substantial amount of money. I personally found it more effective to limit the amount of children’s clothing items I purchased rather than trying to get the lowest price. Again, because children grow so fast, they’re more likely to wear clothes out before they grow out of them. If you buy fewer individual items, you spend less and your child gets more use out of each piece of clothing.
If you do have gently worn or even brand new children’s clothing that no longer fit your child, you can often take them to a consignment shop. This is a nice way to make some money back on children’s clothing.
Food – $1,000 to $2,000 per year
If you choose to formula feed your child, that will likely be a very large expense on your family budget for the first few months of their life. Expect to spend as much as $300 per month on formula when that is your child’s only source of nutrition! As you gradually add more foods as they age, this expense will go down.
From a budget perspective, it’s worthwhile to have your child eat what you eat. When they are small, they do not eat a full adult’s portion at each meal so it really feels like you’re simply sharing a little bit of your dinner with them. If your child has allergies or other dietary restrictions, you may have to spend more on special food for them.
Extra-curriculars – variable
How much it costs to put your child in extra-curricular sports and activities is up to you. This is a completely variable expense that you can choose to spend money on or not!
Generally activities for small children are fairly affordable, ranging anywhere from $65 for 10 swimming lessons to $300 for 3-months of dance classes. As your child ages to middle school and high school, their activities may end up being thousands of dollars per year.
You need to decide which activities fit in your family budget and which do not, and be firm when you say no to what you cannot afford!
Parenthood isn’t as expensive as you think
If you’re looking at the expenses above and panicking internally that you won’t be able to afford it, relax.
Parents have a very low tax rate
When you have a child, you claim them as a dependent when you file your income taxes. You’ll also be able to claim a portion childcare expenses!
Your tax bill ends up significantly lower when you have children than it is without. This means you have more disposable income to spend on all the costs associated with raising a child in Canada.
You’ll receive the Canada Child Benefit (CCB)
Another thing that really helps with child-rearing expenses is the Canada Child Benefit (CCB). This is a tax-free benefit distributed by the government to Canadian parents.
The amount you receive depends on your household income, but will generally work out to a few hundred dollars per child each month. The CCB is direct deposited into you bank account on or before the 20th of each month. It is completely free money you can choose to spend however you like!
Many parents use the CCB to fund their child’s RESP, while others use it towards childcare costs or other expenses. You know best where your family budget needs support, so you can spend it wherever you need to.
Is having a child worth the cost?
Many young people have decided not to have children because of the costs, but for those that do decide on parenthood, it’s definitely worth the expense!
Having a child will more likely than not reduce your lifetime net worth. But life isn’t all about building up your bank accounts, and raising a family offers many non-monetary benefits.
If you’re still worried, it’s worthwhile to follow these tips to afford a baby. You’ll probably end up winging it a lot, just like the rest of us!