How Much Does it Cost to Have a Baby?
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.
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.