For the longest time. we put off having a child as we never felt financially ready or financially stable while all my friends would say “you are never financially ready but that you just figure out how to make it work”. So in 2017, we finally took the plunge and decided we were ready to have children, now I am a total planner so the first thing I did was sit down and start looking at our current budget and figuring it how having a baby would influence these costs, I was determined to have a Baby on a budget. Once I figured out that having a baby on our current budget was possible I started determining the costs of a babies first year of life and we started saving a little nest egg emergency fund. Now our daughter was born in Feb 2018, and I have been off work living on 55% of my salary since Jan 2018. So as 2018 wraps up I am happy to say that we stayed fairly close to raising a baby on a budget that we set back in 2017 and only spent about 25% of our nest egg and most of that cost can be attributed to our trip in June to Vancouver to visit family – a personal spending decision we felt was worthwhile. As I live in Canada, my experience and tips are from a Canadian perspective… to my American readers who get no paid time off with children you are Super Stars!
Are babies really that Expensive? Can you have a baby and stay on budget? What is the cost of having a baby? Can you have a baby on a budget?
According to Moneysense.ca, the grand total cost of raising a child is $243,660 which breaks down to about $12,825 a year or just over a $1000 a month. Now this seems like a huge scary amount however there are many ways to cut these costs and make having a child more affordable. Having a baby doesn’t need to cost a fortune and I promise you it is possible to have a baby on a budget and not end up in more debt by making the decision to have a child. There are tons of ways to save money on baby’s first year: from diapers to formula to clothing and even entertainment.
Once you are actually pregnant you are excited at expanding your family, however the reality of a reduced income soon hits and you have to begin to determine how you will make your financial situation work. Now maternity and parental leave is a huge financial challenge as you are not only living on a reduced income (55% of your salary on Canadian EI) but your expenses have been increased as you need to buy diapers, wipes, formula, clothes and baby gear. There are many ways to get baby items cheap, and how to raise a baby with no money or limited income.
To determine a rough cost of having a child you can use the Baby Cost Calculator
How to prepare financially to have a baby? How do I save money on baby items? How will I survive having a baby on a budget?
The first step is to breathe and realize that you will survive financially on maternity leave and can have success raising baby on a budget. The first step to becoming a new parent is determining what you are entitled to in terms of paid maternity leave. Check first with your company or employer to determine if they will top up your payments while you are on leave, for myself as I am a supply teacher I am not eligible to top ups and knew I needed to rely on maternity and parental benefit through our Canadian government.
In Canada it is quite a process and takes some time to figure out and understand how is eligible and how much you will recieve. My first goal is to explain maternity and parental leave and how they differ, the length of maternity leave in Canada, how much is maternity pay, and whether you should take a 12 month (one year) or 18 month leave. Now I as a supply teacher rely on Unemployment for periods of the year when there is no work such as Christmas, March Break and Summer Vacation so EI is nothing new for me, however to many new moms it can be super confusing! I decided to try and answer some of the most commonly asked questions in regards to Maternity and Parental Leave Benefits. The following information will help you understand Maternity Leave Financial Math, create a budget that works for you, and how to save money for a baby on the way.
Now I am not an expert, nor an employer of Service Canada so all information presented is guidance and should be followed up with a phone call to Service Canada if still unclear.
Step #1: Determine the amount of your Maternity and Parental Benefit through Service Canada
What is Maternity Leave? What is Parental Leave? How Long is Maternity Leave in Canada?
Canada maternity leave allows us to have a combined 50 weeks off between Maternity Leave and Parental Leave. Maternity Leave is 15 weeks long and is only eligible to the birth mother of a child, while Parental leave is 35 weeks long and is eligible to both parents whether biological or adopted. An important not is that all benefits must be used within 52 weeks of the child’s birth. Maternity leave in Canada allows mothers time to adjust to being a parent and to heal from the process of birthing a child. Parental Leave in Canada allows either parent time to take time off to care of their newborn, while their job is secured. This amount to just under a year long maternity and parental leave combined.
Reference From Service Canada’s Website
EI maternity benefits are payable only to the biological mother who is unable to work because she is pregnant or has recently given birth. To receive maternity benefits, you need to prove your pregnancy by signing a statement declaring the expected due date or the actual date of birth.
EI parental benefits are payable only to the biological, adoptive, or legally recognized parents while they are caring for their newborn or newly adopted child or children. To receive parental benefits, you must sign a statement declaring the newborn’s date of birth or, when there is an adoption, the child’s date of placement for the purposes of the adoption and the name and address of the adoption authority. In cases where the child is not legally adoptable, parental benefits could be payable from the date you attest that you consider the placement a permanent one. In these circumstances, the Commission may, at any time, request proof certifying that the child for whom you are claiming parental benefits has been placed with you by a recognized authority and that the placement was not merely a temporary one.
For biological or legally recognized parents, EI parental benefits can be paid starting from the child’s date of birth. For adoptive parents, parental benefits can be paid starting from the date the child is placed with them for the purpose of adoption. In cases where the child is not legally adoptable, parental benefits could be payable from the date you attest that you consider the placement a permanent one.
New in 2018
The Government of Canada created the option of an 18 month maternity and parental leave program which includes 15 weeks of maternity leave and 61 weeks of parental leave. The maternity leave policy in Canada is constantly changing and being improved to try and combat the changing of families and roles in the household.
New in 2019
Every dad should have the opportunity to take paternity leave – not only does it allow them to spend time with their young children, but I also think it makes them better fathers and husbands as they have a better understanding of what it takes to care for a child all day long. By having dads stay home this also breaks home the age old gender stereotypes that in 2018 are no longer relevant as women have jobs just as men do and in many cases can be the bread winner of the family.
Canada maternity leave law states that businesses must allow fathers to take time off if they request it, and must hold their jobs. Quebec has for years encouraged fathers to take time off with their children and as a result 87% of fathers in Quebec have taken a parental leave, and as a result it has shown positive for kids. As of June 2019, the Federal Government of Canada will introduce a 5 week use it or lose it incentive for new fathers to take parental leave. The way it will work is that fathers can take up to 5 weeks off in addition to the mother’s maternity and parental leave, adding up to a total of 55 weeks paid by employment insurance but only if both parents take time off work.
How much money does Canadian Maternity Leave Pay? What is the Maternity Benefit pay rate? Use these amounts to figure out a budget for a baby.
Maternal leave in Canada is paid at 55% to a maximum yearly insurable salary of $51,700 based on your average weekly insurable earnings. This means the maximum amount that anyone can be paid is $547 per week pre tax. Pregnancy leave also known as maternity leave can be taken up to 12 weeks before baby is born but these weeks before baby is born come out of your total of 15 weeks of maternity leave. There are lots of things to do before baby comes but I highly suggest you figure out where, how, and when to apply for benefits as it can be a lengthy process.
The rate of Employment Insurance benefits depends on the option you choose:
Maternity leaves in Canada is 15 weeks and paid at 55% regardless of the parental benefit option you choose. Maternity leave policy in Canada can only be taken by the biological mother. Maternity pay is a maximum of $547 a week.
Standard Parental Benefits pays a weekly benefit of 55% for up to 35 weeks, while the Extended Parental Benefits pay 33% for up to 61 weeks. The maximum Standard Parental Benefits is $547, while the maximum Extended Parental Benefits is $328.
How will my weekly benefit rate be determined?
Total insurable earnings are based on your best weeks (the weeks you earned the most money), and are used to calculate your average weekly income. The number of best weeks calculated is based upon the unemployment rate in your region and can be anywhere in the range of 14 weeks to 22 weeks. Your total income for your best weeks is divided by your required number of best weeks.
For example Ex. Your total income is $45,000, it would be divided by 22 (lowest unemployment rate region) = $2045 weekly income
Your weekly income will then by multiplyed by 55% for regular parental benefits and 33% for extended parental benefits.
To find out the rate of unemployment in your region, visit EI Program Characteristics.
Is it better to take the 18 month Extended Parental Leave or Standard Parental Leave?
This all depends on your household finances and job situations, however explained below is the total amount of money paid on Maternal Leave in Canada including Parental leave based on the maximum weekly benefits.
|Regular Parental Leave (12 months)||Extended Parental Leave (18 months)|
|Maternity Leave of 15 weeks at 55% = $8205.00||Maternity Leave of 15 weeks at 55% =
|Parental Leave of 35 weeks at 55% = $19,145.00||Parental Leave of 61 weeks at 33% = $20,008|
|TOTAL = $27,350.00||TOTAL = $28,213.00|
Now, Maternity Leave can be exhausting, emotional, lonely, and exciting – basically it is one big roller coaster ride of unknown. The one thing that is certain is that the time flies by, and before you know it you have a 1 year old and are heading back to the working world. Navigating this new world called motherhood can be challenging and yet so rewarding, so it is important to make the most of the time you have off especially here in Canada as we are blessed to have a partially paid year off unlike our neighbours in the United States. Once the fog of motherhood starts to settle at about the 2-3 month mark, you may be starting to think about what to do on maternity leave. There is a variety of things to do on maternity leave depending on your interests. Before you know it you will be going back to work after maternity leave. Making the most out of maternity leave is so important as your child will only be that small once, and the memories you share will last a lifetime specially with the use of digital cameras!
Frequently Asked Questions:
Can both myself and my husband be paid at the same time?
Parents can be paid at the same time but it will deduct 2 weeks from the 35 week bank of weekly payments, 1 week of payment for each parent. However as of 2019 if dads decide to take time off work they are entitled to 5 weeks of their own that will not be deducted from the 35 week parental leave bank as long as both parents take time off work.
When can I start my maternity leave?
Maternity Leave can be started up to 12 weeks before your due date, but remember these weeks count in your total of 15 weeks of maternity leave, so it is suggested that your work as close as you can until baby is born. If you feel that working is becoming to difficult you can talk to your doctor about taking sick leave before baby is born. Due to my past car accident and back issues I was able to take 4 weeks of sick leave prior to maternity leave.
Can I work on Maternity or Parental Leave?
On Maternity Leave, the government will deduct $1 for every dollar you make, however on Parental Leave they will only deduct $0.50 off your benefit for every dollar you earn.
Do I get paid right away? Will I receive maternity benefits as soon as my child is born?
Be prepared that it takes a long time 2-3 weeks for Maternity and Parental Leave Claims to be processed. You also need to wait 1 week with no income as your waiting period (basically the same as a deductible on regular insurance).
What other financial support will I receive?
- Family Supplement – Eligible for net family income of $25,921
- Canada Child Benefit – Benefit to help with the cost of raising a child
Reference from Service Canada Website:
We calculate the Canada child benefit (CCB) as follows:
- $6,496 per year ($541.33 per month) for each eligible child under the age of six
- $5,481 per year ($456.75 per month) for each eligible child aged 6 to 17
We start to reduce the amount of CCB you get when your adjusted family net income (AFNI) is over $30,450. See information on reductions here.
I hope this information clears up on any questions on Money and Maternity/Parental Leaves, it can be a confusing time when you are just becoming a new parent. This information will allow you to create a budget that works for your family and to feel in control of your families financial situation. Budgeting for a baby doesn’t have to be difficult, it just takes some research and planning.
Step #2: Begin creating a Baby Budget
- Input your Income to determine your Total Monthly Budget: Make sure you include all income in your household, including any government cheques such as Child Care Benefit, Generalized Sales Tax Rebate, Harmonized Sales Tax Rebate, etc
- Input your expenses under all of the Categories – This is determining exactly how much money you will spend each month including baby essentials
Budgeting for Baby
Once you have determined your total income and expenses, determine if you can live off of one full income and one reduced income or if you need to determine a way to bring in more money. Determine how much time you can afford to take off – a couple months or the whole year? Having a baby on a budget is not an easy task with the current cost of living in Canada. How to raise a baby on a budget is simple…. it is going to require some sacrifices.
Some tips to cutting costs include: getting rid or cable, reducing cost of cable and cell phone plans, reduce car insurance since you will be driving less. For us I was able to personally save $70 a month on cable by getting rid of it and relying on streaming television, and I reduced my car insurance to a personal plan versus being a commuter and it saved about $25 a month.
Step #3: Create a Baby Emergency Fund or Nest Egg – How to save for a baby in 9 months
Unexpected costs always come up so it is much easier to have an emergency fund and feel prepared then wait until you have an issue. I would aim to have atleast $1000 put aside in case of emergency, if you simply save $83 for each month of pregnancy you will easily be able to hit that goal. Keep this money in a separate account so that it is only used in a complete emergency situation and is not confused with your regular bank balance. If your budget is already super tight remember by simply cutting some of your existing costs such as cable or eating out you can easily find the income you need to create your nest egg.
Step #4: Sign Up for Baby Freebies
Have a baby on the way and no money? How to have a baby cheap? Start out with these helpful freebies!
You may also be interested in:
- Saving Money on Diapers
- Home Made Baby Food: Reasons for Making Home Made
- Cloth Diapers: Reasons for Using Cloth Diapers
Saving Money on Kids Facebook Deals Group: Deals on car seats, clothes, toys and more! Tips on Parenting on a Budget.
If you live in the Greater Toronto Area, you should check out my list of Baby Friendly Activities