Our boys will pretty soon be two years old and we now appreciate how expensive it is to have a baby. If you are going to be a new parent soon or are planning to have a baby, here’s what you can expect:

Capital expenses – Crib, stroller, car seat, changing table etc. would fall into this category. The good news is that you can talk to your friends, neighbours, relatives and co-workers and find out if they have these items.

Cost: nothing to $1,000s.

Ongoing expenses – Newborns tend to go through lots of diapers and formula (if bottle-fed). Then there are clothes, baby food, toys etc. You could look for hand-me-down clothes and toys, but unfortunately, the other stuff adds up fairly quickly.

Cost: varies.

Day care – If both parents work, day care is by far the biggest expense. Here in Ottawa, formal day care costs about $950 per month for a child under 30 months and $750 per month thereafter. Even home day care costs about $750 per month for a child under 30 months and slightly cheaper thereafter. On the bright side, day care is tax deductible to the spouse with the lower income to the tune of $7,000 per year.

Cost: $40,000 to $48,000 before tax breaks.

Opportunity cost – A parent who takes parental leave to be with their child may experience a significant loss of income. Employment Insurance benefits cover only 55% of a maximum of $40,000. Taking time off might also affect your growth at employment.

Cost: If you are earning $60,000, you can expect to have $20,000 to $25,000 less in after-tax income.

College education – Saving for your little one’s college should be secondary to saving for your own retirement and paying off the house. Still, if you can afford to, you should set up a RESP and contribute enough to at least get the maximum government grant.

Cost: $2,500 per year per child.

Miscellaneous – A family van, a bigger house (if you have more than two children), extra life insurance premiums etc. would fall under this category.

Cost: varies.

This article has 44 comments

  1. That’s a lot of dough!

    We never had a change table – we couldn’t decide where we wanted to put it if we had one and we ended up just changing him on the floor which is safer anyways.

    Mike

  2. Canadian Capitalist

    On the bright side though, babies take up so much time that there is little chance of blowing money on frivolous shopping.

  3. I can’t get over how much day care can cost! Next question is, how does one go about choosing a good day care?

    FT

  4. I used to be a bit of a socializer…expensive dinners, sporting events, booze etc. I honestly think having a baby has saved me money because I don’t do any of those things anymore.

    Mike

  5. Don’t forget incidental costs like if your child wants to enjoy pasttimes like:

    * Piano Lessons $200-$1000 per year
    * Hockey: $2000 per year is about average without travel and such
    * Dancing or other arts: Unknown but not cheap

    What about those family vacations too?

    They are priceless as “assets” though, so I don’t mind paying the price either :-)

    –C8j

  6. Canadian Capitalist

    FT: We just asked around for recommendations for daycare. It’s easy to see if a daycare is good: your child should be happy after the initial weeks.

    Big Cajun: I deliberately left out the costs of “big babies”. You’re right: sports, piano lessons, iPods, Disney vacations, school supplies, birthday parties all cost a pretty penny.

  7. AND allowances too! :-) :-(

    Again, worth every penny, however, best investment going. –C8j

  8. Your daycare costs are a little off for Ottawa CC.

    Registered daycare in Ottawa at a bilingual centre is ~ $1100/mth for under 18 months of age. (the quote I got) If the mom is going back to work at 12 months. $985 at the same daycare after 18 months of age.

    Registered home daycare (the route we’re going in August) is $225/week. This may be high, but the it’s a 1:3 ratio and right around the corner from our house.

    Yes the tax deduction (for the lower income partner) is capped at $7000 /yr YET the $100/mth Conservative UCCB is taxed on that same partner.

  9. There’s a great article in the most recent edition of Moneysense magzine. It talks about how the Canadian tax system does not favour young couples with kids. They also interview a young working couple in Ontario with two kids and they are basically just breaking even each month.

    Having kids is expensive, and at the end of the day once all expenses and taxes have been paid there isn’t much income left.

  10. Pingback: Children as a Consumer Good vs a Producer Good « Financial Security Quest

  11. KS: I can believe it. In the 70s and 80s, there were more stay-at-home Moms to raise the children, or, in my Mom’s case, to provide reasonable care while my Mom worked. Also, it seems there is less of a “community” feel and effort to support young families as the drive to have working adults replace babyboomers who retire.

    All Canadians should at least appreciate the 1 year of mat./parental benefits because they certainly don’t have that in the States.

    http://en.wikipedia.org/wiki/Maternity_leave

  12. Canadian Capitalist

    Jon: We send our kids to a non-profit, registered day care and we pay $942.50 per month. I am sure there are differences in fees between day care centres.

    KS: I read that article too and I agree with its suggestion that as a society, we should provide financial incentives to young families to have more children than average.

  13. Maybe I’m the one who’s off! Definitely got to shop around for day care!

  14. Daycare cost vary heavily by region. My wife charges $30/day for full time care (she doesn’t take kids under 1 year).

    CD

  15. mom of a 19-month old

    Baby denifitely costs money,; they also serve as great incentives for their parents to accumulate the family net worths. At least this is true for me.

    New members to the family, they change their parents’ life style, personal goals, career path and pace, and much more.

    A more in-depth cost and benifit analysis is suggested here. :-)

  16. I read that article as well, but I have to say, I have a hard time feeling badly for a couple that has two healthy children, a mortgage that “consumed a reasonable 25% of their income” (before the children came along) and spend “$10k a year toward running their cars”.

    My mother was a stay-at-home mom and my dad had a decent income but nothing to write home about. They raised 3 children in a small to medium sized home with only one car for most of my childhood. I never felt like we didn’t have enough.

    Couples tend to have children later in life these days – usually after they’ve been established in their careers and livin’ the good life with two incomes. Once the kids come, adjustments need to be made but many couples aren’t willing to do that. Instead, they’re looking to move from a 1,500 sq. ft. to a 3,000 sq. ft. house because “it’s too small”.

    Though I understand that children aren’t cheap, I just have a hard time sympathizing too much with parent’s that say they can’t afford a 3rd child because they aren’t willing to give a little up.

  17. Canadian Capitalist

    telly: If our birthrate was high enough to support an aging population, I would agree that a family that wants a third child needs to figure out how they will be able to afford it on their own. But the reality is we have a low birth rate. If a little financial help would push them over the edge and society benefits as a result, it is up to us to decide if we want to make that investment.

  18. Bravo, CC. I’ve been looking for words as eloquent as yours to make that exact argument.

  19. I agree CC, and I live in Wpg where everything is cheaper. (eg. day care used to cost $25/day/child at a very good centre here.) How could a couple just starting out afford a $250K house, even one car, and more than 2 kids? We also have to abide by new rules such as seatbelts and car seats that means a family with 3+ kids can’t just buy a small sedan and pack the back seat with their brood. Add that to the systemic bias in favour of boomers plus more activities these days (btw dance classes run about $1000/yr here) and it becomes difficult. On the flip side we also tend to forget that 2 working parents increases other costs such as food/groceries because no one has time to cook from scratch anymore.

    And… who gets to income split: seniors with enough income to be very comfortable but didn’t bother to use spousal RRSPs.

  20. Let’s all move to Quebec ! they have $7/day daycare. I can’t believe it is that expensive outside the Belle Province!

    I calculate $400/months for my 2 years old son on average. That obviously doesn’t include day care or major purchase such as crib. That $400 is only for food, diapers, clothes and activities.

    But you know what, when I come home and he runs to me and hold me tight, it is priceless!

  21. Yes, the Belle Province has $7/day daycare. But most places have a 2-3 year waiting list!

  22. Canadian Capitalist

    Jon: You’re likely right about the daycare costs for children between 12 and 18 months. Our kids are now almost 2 and I found out yesterday that the daycare they go to don’t even accept children below 18 months. So, your $985 is pretty close to what we are actually paying.

  23. Don’t forget QC daycare is like health care… It’s included in your income tax bill.

  24. Actually, in QC, you work for the government as you are so taxed that nothing is left in your pockets ! LOL!

  25. I m not sure why people keep saying baby/kids cost a lot, I have a one year old and I m making more money, see below:

    1. Myself, my wife and my daughter lived with my parents, we do not pay rent, its a 2500 sqft home with 6 bedrooms, we got enough room for two kids and two pair of parents.

    2. I got $160 child care benfit etc… from the goverment, the 60 dollars are tax free, my wife breast feed the child, no formula required, the only variable cost is the diaper, which cost around $30 per month, our net gain from the Government benefit is like $130-tax.

    3. My wife got piano performance art cetificate, she teach my child piano at home, no need to join piano class.

    4. Since we live with my parents, they are retired, they provide FREE Daycare, Also, I still pay them $7000 per year so that I can CLAIM the Childcare expense!!! I gain another $2000 or so from the tax break. (My parents got very little income as they are not 65 yet, no OAS etc…, so they pay no tax even after reporting the $7000 from me.)

    The conclusion is that I make like $100 a month from the child care benefit and around $2000 tax break per year.

    Also, our friends give us the high chair, all the toys and most of the clothings for the child, we RARELY spend any money to buy new things for my child!!!!

    My dad acutally told me that he know one family who got 6 child and they live on the child benefit like $1500 a month etc.. and both of them does not need to work!!!

    Stop saying children cost money, in my case children MAKE MONEY!!!!!!

    I m planning to max out the RESP so that I can get FREE grant from the government for investment (its like someone borrow you money to invest for free) and tax defered!!!

  26. Canadian Capitalist

    GTA: All I can say is that very few people are in your position. How many extended families live under the same roof? How many grand parents are even in the same city and willing and able to provide child care?

  27. GTA – do the math. If you’re paying your parents $7k per year and making $2k in tax rebate + $1200 in UCCB that comes out to a loss of $3800. And you say you make money from the kids? The RESP is another short term cash flow loser – you contribute $1000 and only get $200 deposited into the account. Where are the dividends?

    On a more serious note, I suspect we’re in a break-even situation with our kid because of his generous grandparents and all the used items we’ve borrowed (and we don’t live in my parent’s basement) but I don’t think that is the norm. Part of the problem is that a lot of new parents buy too much stuff and buy it all new.

    Mike

  28. Some folks have furry four-legged babies. Pets don’t need daycare or many of the other expenses of human children :)

  29. FourPillars:
    I agree that the loss will be $3800, but the money is going to my parents pocket, that will use to pay for bills for our home, which is much better use that paying daycare business, someone elses profit!!!!

    For RESP, I acutally did some calculations, and comparing if I put in 18 years of contributions into RESP and get the 20% FREE Grant that comes along with it, during the 18 years of the EXTRA investment compounded earning that comes from the tax deferal and 20% FREE Grant, even if my kids does not go to college and I have to return all grants and tax the earning on marginal taxrate and 20% surtax on top of it, I still MAKE MORE than investing outside RESP. The tax deferral and 20% grant combined with compounds earning year after years for the next 18 years DOES MAKE A BIG DIFFERENT!!!

    Riscario Insider:
    Pets do not talk in English or any human language and do not say daddy and mommy before they turn 1 year old!!!! Please do not compare HUMAN with ANIMAL, it does not make sense.

  30. I agree with FourPillars here. I’ll come clean and admit that we don’t have any children (yet) so it’s probably still early for me to speak on this (though it’s never stopped me before ;)) but I’ve been to about 4 baby showers in the last few months and I often wonder:
    Does one really need a baby wipes warmer or a diaper genie (with refills)?

    I remember thinking the same during the wedding showers (a $250 vegetable serving bowl???)

    I just think people are starting to confuse needs with wants and wonder why they can’t afford a 3rd child. If it’s really important to you, most often you should be able to find a way.

  31. lol telly – baby wipes warmer?? I’ve never heard of such a thing.

    We have a diaper genie and I would definitely recommend this. You can get by without one but I wouldn’t want to…

    $250 veggie bowl? $250 will buy you a lot of veggies.

    GTA – the RESP is not a profit centre for the parents – if you are saving for their education in some form then that’s costing you money!! The only way you can profit is if they don’t go to school.

  32. Canadian Capitalist

    I’ve heard of heated changing tables (apparently it is a best seller created by an ex-tech. worker who told that local newspaper that high-tech changes every year but the jolly jumper has remained the same for 30 or 40 years. I suppose he has a point), so come to think of it why not a heated baby wipes. I’ll agree with Mike about diaper genie. Better to get one :)

    GTA – I don’t see how you can profit with a RESP, which is intended to help you save for your child’s education. You have to return the grants + pay a 20% penalty + pay tax at your marginal rate. I don’t see how you’ll benefit if your child doesn’t go to school.

  33. That’s a very useful piece of information. I’m gonna be married soon and a baby is in my plans. It is rather expensive to have a baby today, isn’t it? And I want to calculate all the expenses going for a wedding party as well. Welcome to my blog, too, where you can also find information about life and finances.

  34. I don’t understand how GTA is able to “pay” jis parents for childcare to create a tax deduction. The tax guidelines are very clear that a parent living under the same roof does not qualify as a caregiver (as most family member do not)

  35. Canadian Capitalist

    New Mommy: I didn’t know that grandparents do not qualify as caregiver if they live under the same roof. Can you point me to where you found this information? This form from CRA makes no mention that you can’t pay grandparents:

    Link

  36. This article is a thoughtless joke. Anyone who has responded to it is also a fool. Myself included.

  37. Pingback: Child Savings and Investment | Loanio

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  39. Both my parents receive OAS , CPP and GIS payments .

    They have no other income besides the above 3 i.e RRSP income , Investment Income , Employment icome etc .

    Now I was wondering if I pay them $ 7,000 a year to take care of my kid ( so that I can claim the expense ) and they also receive $ 7,000 extra each year is it worth it as although I might get a tax credit their OAS/GIS will go down because of the extra income .

    So basically my tax gains will be offset by their deduction in OAS/GIS .

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  41. Looks like having kids is like owning an American gas guzzling SUV. It is cheaper to control one’s hormones and bank the money into a BMO Monthly Income fund and collect dividends each month. Pretty soon, you would be able to live off dividends and not work, if one controlled one’s hormones and didn’t have a baby. Those mouths to feed consume time away from being able to work, and money for them in various ways explained. I make only $12.00/hour but bank $20,000 a year because I eat for free going to Sikh Temples that offer excellent vegetarian food, and crashing on couches of friends. Also, taking a night security job where you can sleep in a building while getting paid is a great way to not only offset rent, but to collect a secondary income in addition to your regular 9-5. It is important to get 2 security guard jobs one working 4 days and the other 3 days, or one 2 days and other 5 days for 8 hours per day at night so you don’t have to pay rent. If you get fired, you use the other reference to replenish employment with another security company, so you don’t have to worry about references. Remember, though, as long as your 9-5 job remains intact, the extra security job is a side job that would not have existed anyways so it matters not if you ultimately lose it all since you would have gained income to bank until the fun ride is over.

  42. For real, first cost was the wedding, rings, and now the baby. I work 2 jobs to catch up and 60 hours a week.

    You can make money wtih an RESP if you are willing to wait 18 years. Your principal is 100% guaranteed and returend to you tax free. Your interest assume max 42 k, return 40%, 140 k 20 years later.

    People need to stop asking governments to reduce tuition fees and increase the RESP program.

    If people really want to be rich, they’ll double up their mortgage payment and pay that off in half the time and save 80 k!

  43. I’d rather have pets than children. I can’t stand kids so I guess I’ll be saving a whole bunch of money avoiding them…. Thank God!!!!

  44. First of all the choice to have a child should be so much more in depth than finances. Life is expensive so are children. The real question for couples contemplating children is how much of yourself are you willing to give? Financially speaking just tips the iceberg so to speak. Time, emotional support and entirely reinventing who you are is much more to contemplate than finances. Financially speaking where there is a will there is a way. But what about the rest??

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