4 Things Every Future Parent Should Know
It is the dawn of a new day, filled with happiness, challenges and lessons to be learned. I am sure you have read all about parenting and child psychology… But what about finance? Here are the 4 things every future parent should know:
You might not have had the time to think about it with all the major changes you undertook in the last few months, but your intimacy will be challenged upon the birth of your baby. Many companies use this opportunity to contact you with their brand new products and offers. Chatting it out with telemarketers might not be the first item on your list coming back from the hospital. How can you avoid it? By registering to the National Do Not Call List (DNCL).
2. Life insurance upon birth
You might be tempted to purchase life insurance for your new baby (especially if you have not blocked your number and companies keep on calling you about it). Here’s what you need to know.
First, life insurance does not protect the insured, but its relatives. Purchasing a policy for your newborn is therefore something you do for you, not your child. And instead of purchasing a new policy, it is usually much cheaper to add an amendment to your own and get the same coverage. This being said, buying your child life insurance is not a bad idea: it all depends on your situation.
On the other hand, it is imperative that you, the parents, are insured. Simply think about what your baby would do if something were to happen to one (or the both) of you. As the saying goes, better safe than sorry. And it is now possible to implement insurance strategies in which the policy can later be sold at profit when your child has grown.
3. Registered Education Savings Plan (RESP)
What usually turns out to be the best investment for young families is to open a Registered Education Savings Plan. As mentioned in a previous post, the RESP allows your money to grow tax-free, while making you eligible to a 30% tax credit on every contribution up to a yearly maximum of 2 500$ per child.
As you may expect, institutions provide parents with many different options. If you did add your information to the Do Not Call List, the worst of them have probably been filtered out already. This being said, you always want to be careful when being presented a contract. You should never be forced to contribute to a RESP, nor choose between a narrow selection of pre-determined investing options. In case of doubt, ask questions!
4. Tax credits
Finally, both governments provide support to families with children in the form of tax credits. The two most important are the federal Canada Child Benefit and the provincial Tax Credit for Childcare Expenses.
While those were the 4 things every future parent should know, the family planning process does not end here. The arrival of a new family member offers a ton of fiscal optimization opportunities. By planning your RESP and TFSA contributions, capital gains and losses, insurance strategies and other deductions, your tax return will grow even faster than your new baby!