Millennial Parents Guide To Financial Planning For Children

The Liberal government estimates the average family will receive nearly $2,300 more each year, thanks to the new Canada Child Benefit. But what does it mean for my family?

There’s a reason I hire an accountant to do my taxes.

Crunching numbers and keeping up with tax benefits and investment strategies? Not my forte.

Don’t get me wrong: I like to know where my money is going. I meet with my family advisor regularly and come prepared with a list of questions. I track my family’s expenses and I (try to) stick to a monthly budget.

I can tell you my family spends approximately $1,200 on food each month. We try to cook from home as much as possible, but we do enjoy treating ourselves to a night out every now and then, which costs even more. Daycare ends up costing about $900 per month.

To learn more about how the Canada Child Benefit will make a difference for your family, click on this video.

Then there’s the cost of toys and clothes (don’t even get me started on the cost of a tiny pair of shoes these days). We’re not even paying for any extracurricular activities yet – but as someone who grew up playing competitive sports, I know how quickly those numbers add up.

According to a 2014 US Department of Agriculture report, the cost of raising a child in the US in 2013 was $245,340 to the age of 18.

It’s a frightening statistic, and yet the numbers make sense. I was speaking to a friend the other day who is a mom of two boys, ages 6 and 10. Her husband, who happens to be an engineer, recently added up the total they’ve spent on daycare over the years: $106,000.

I’ve written before about how difficult it is for millennials to get ahead, given today’s rising cost of living and the lack of opportunities for growth in the current job market. It’s no secret millennial parents are struggling to make ends meet.

And yet, change is on the horizon. As a former teacher and parent of young children himself, it appears Prime Minister Trudeau has not only recognized the financial challenges we’re facing, but he is following through on the promise to do something about it.

How Does the Canada Child Benefit Affect My Family?

I’ve read a number of articles suggesting families will be happy with the introduction of the Canada Child Benefit (CCB). After all, it’s  tax-free monthly payment made to eligible parents, based on net family income, meaning it is literally ‘putting money in the pockets of mom and dad.’

However, I also understand the changes the Liberal government has put forth bring varying results, depending on family net income, as well as the number and ages of children and for some, the changes are not as progressive as they had hoped.

Here is the actual amount calculated on the CRA website for a family of three with an annual household income of $90,000:

We estimate the Canada Child Benefit

would give your family a tax-free benefit of:

$262/month

$3,150/year

The Canada Revenue Agency will calculate your actual entitlement. Changes will begin starting July 20, 2016.

I’m all for taking advantage of free money from the government. But how do I ensure my family is making the most of this change?

What should I do with this free money? Should I use it to subsidize our lifestyle or set it aside to invest for my child’s education and future? What will the true impact be for my child over the next 10, 20, 30 and even 40 years if I use it to save for their future?

Having graduated from university with tens of thousands of dollars in loans (and no assets), I know how difficult it is to get ahead. I’d love to help my children build wealth for their future so they never have the stress my friends and I are experiencing every day.  How can the Canada Child Benefit help me achieve these goals for my child and what is the right thing to do for their future with this tax free gift from our government?

Do you have questions about insurance that you’d like answered in an honest and clear language we can all understand? Post your concerns to our Facebook page and we will do our best to respond in our upcoming post.

This post is part of the Diary of a Millennial Parent series. Every other week, I’ll write about my experiences as a millennial parent trying to make sense of this financial maze and what’s the best way through. Be sure to check back to the answers to my questions, which will be offered in a follow up post by Michael Lampel, President and Founder of insuranceforchildren.ca, Canada’s leading provider of financial planning for children and creator of Child Plan.