Friday, January 29, 2010

FRUGAL FRIDAY - planning for baby

Bringing baby home without the bacon
by Christy Laverty

As printed in the Fall 2008 issue of Urbanbaby & Toddler magazine

Having a baby is a big life change. It is a time of excitement and anticipation. There is so much to do: shopping, taking folic acid, prepping the nursery. But many forget to plan financially for the arrival of your bundle of joy.

Children are expensive. Statistics show the first 12 months of a baby’s life can cost more than $10,000. What about all those years after?

Gayla Cook, branch manager at Coast Capital Savings Credit Union, and mom to 13-month-old Evan, says planning ahead is the key. “It’s the best advice but it’s hard to follow. If you can plan ahead, if you can make some small decisions ahead of time, it will eliminate the extra stress, the financial stress.”

Cook admits money is the last thing any new parent wants to worry about when baby gets home.

The first thing to do, says Cook, is find out if you qualify for Employment Insurance (EI). There are a lot of people who just don’t know the requirements. It’s a good idea to do this when you are thinking about getting pregnant, or at least early on so you can make a financial plan. “If you are eligible for employment insurance, the basic benefit rate is 55 percent of your average insured earnings up to a yearly maximum insurable amount of $41,100. This means you can receive a taxable maximum payment of $435 per week,” says Cook.

Then it’s time to get a budget together. Cook says it’s important to first find out what you are spending before baby arrives, where the money goes and what are the discretionary things that maybe you can live without. Remember, you could be living on a lot less than you are used to. You also need to start factoring in all those additional baby costs, like diapers, wipes and clothes.

That is exactly what Krista Boyak and her husband did before their 13-month-old daughter Sophia arrived. “We kept track of our receipts for a month to see where our money was really going. We even kept track of parking meters, coffee, and all the little stuff.” Boyak, who is home with her daughter, says they try to stick to a budget and, every once in a while, they monitor their spending to see if they are really on track.

Cook says when you are planning a budget remember that EI payments are usually issued within 28 days from the claiming filing day. That means there will be a two-week unpaid waiting period before the benefits kick in. There is a relatively easy and painless way to start stashing away cash for your maternity or parental leave, she says. “I set up an automatic special term deposit. Only on my payday, every two weeks, $100 or $50 went into this term deposit and it made a little bit of interest, more interest than if it were in a savings account. I just knew in the back of my mind that was there and that would help me.”

Automatic deposits were key for Brad Scott and his wife Tracey before six-month-old daughter Imogen arrived. Scott says using automatic deposits into a savings account really helped. Scott has some advice for would-be parents: “Use automatic payments to pay down your debt and put some money aside so you’re prepared for the drastic cut in pay.”

Mike Dezell, and his wife Jennifer, did start stashing away money before their son Samuel arrived. “During Jennifer’s pregnancy she began to put a portion of her pay cheque aside each month in a ‘For Baby Only’ account,” says Dezell. He and his wife wanted their son to be cared for at home until he turns two and that is why Dezell is now a stay-at-home Dad. “Jennifer took a full-year leave from her work and after then it was up to me.” Dezell has his own landscape construction business, so he closed up shop this past January to begin his year at home with Sam. He admits that while having a child was the best thing they have ever done, it was much more than they thought it would be, in every way, including expenses. “We’ve actually begun to operate within a budget for the first time in our lives, in the last two months,” Dezell says.

Finally Gayla Cook says parents should buy life and/or disability insurance. “Disability in particular,” says Cook. “The chance of you being killed is very slim, but the chance of you getting into a car accident and hurting your back are quite high and then now you are off work.” She says it’s all about protecting your family. “No one wants to talk about it, no one wants to spend the money, but it could be absolutely the most critical thing that you do.”

A little financial planning can go a long way.