Hello Mommy & Daddy
Posted by Gail | Filed under Money & Family
It funny how your definition of yourself changes when you add “Mommy” or “Daddy” to your list of titles. But the transition to parenthood, while the most natural thing in the world, isn’t always smooth. When I first found out I was pregnant, I was overjoyed. As my belly grew so did my sense of dependence on my husband (I didn’t like that) and my worry about how I would manage to balance two roles: professional woman and mother. Would I go back to work? (This really wasn’t a big question for me. Writing keeps me sane.) Who would look after my little princess? How would we live through my maternity period on just one income? (I’m self-employed so I wasn’t entitled to maternity benefits.) In the end, it all worked out fine. But it wasn’t luck. It was because I had a plan.
There’s nothing like practicing to live on less to let you see how you’ll cope financially once Darling Daughter or Sonny Boy arrives. During pregnancy, try living on one income. Put the other income into savings or use it to reduce your high-cost debt. If you’re flying solo into motherhood, now’s the time to start planning how you’ll work baby’s needs into your budget. Set aside the money you’ll be spending on baby food, diapers, and all the rest.
Maternity leave alone will bring a cash flow crunch since Employment Insurance pays only a small percentage of what many people have been earning. And for you self-employed cats like me, signing up for EI can be an expensive option if you’re planning to have just one child. Back when I did it, EI wasn’t even an option so I had to stockpile money to have something to live on during my mat leave.
Think about a delay in taking the deduction for your last RRSP contribution. Hold on to the deduction until you return to full-time work and you will be back to a higher marginal tax rate so your deduction will be worth more.
It’s not unusual for retirement savings to take a back seat to educational savings and home ownership once two become three. While you may have to reduce the amount you put away in acknowledgement of the increases in expenses and the shifts in your priorities, you shouldn’t give up on your retirement plan completely. Even a small contribution each year will compound significantly, and it’ll mean you won’t have to turn to your children for support, just when they’re having their babies.
If your financial reality has included the active use of credit, it’s time to think about what kind of credit you’re using and what it’s costing you. With a reduced income, a credit card that charges 22% in interest is not the answer to your cash flow crunch. Apply for a cheaper card and transfer your balance. Also think about overdraft protection… (I’m not a fan of OD, but sometimes it’s better than the NSF alternative). While a product of last resort, overdraft will at least eliminate the bruises to a your credit history that comes with bounced cheques and missed payments.
The arrival of a child brings many added responsibilities, including making sure your child will be cared for in the event of a catastrophe such as death or disability. This next question is a tough one, but it needs to be answered, so here goes: If you or your partner were to die tomorrow, would there be enough money available to raise your sweet innocent to maturity. Would there be enough for food, clothing, a roof over her head? Would he be able to take piano classes, travel, get a university education? Or are you depending on the kindness of family and friends, or worse yet, strangers?
If you’re worried about working insurance premiums into your already tight cash flow, know that the later you leave it, the greater the risk that you won’t be covered and the higher the cost of your insurance.
Familiarize yourself with the tax deductions and credits available to you as new parents. The childcare deduction is usually a big one. Everything from a nanny or daycare, to occasional baby-sitting expenses can be claimed, as long as you get a receipt.
And at no point is a will more important than when we have children. This is the point at which my ex and I stumbled after Baby Girl was born. It took us almost two years to make a will because we couldn’t decide whom to name as her guardian. All our procrastination wouldn’t have done a thing for Alex if we’d both kicked the bucket. And nothing should strike greater dread into your heart than the idea of your children’s futures being left to the court system.
January 14, 2013 at 9:22 am
You definitely gave me something to think about when we have kids. We thought about our incomes and how we’re going to support our future kids, but we never thought of who’s going to take care of them if we pas away.
January 14, 2013 at 10:12 am
My husband and I stummbled on the will thing, not for want of trying. We do not have anyone who can really care for our child in our family, more than that, no one to manage the estate that would be left. It is something I want to put in place before we travel again, as having someone is better than no one
January 14, 2013 at 11:05 am
My husband and I were recently asked to be guardians of our friends twins should anything happen to them and that really got us thinking about our future plans too. We haven’t quite made a decision but were actively communicating about it now.
January 14, 2013 at 11:40 am
Gail, thank you for reminding future parents.
I am self employed and so no maternity benefits. We figured we would be okay as I would be able to keep working while home with the baby. What we didn’t count on (what new parent does) was the actual cost of raising a wee one, the amount of time they need and how exhausted you as new parents become. We also didn’t count on Hubby being laid off when our daugher was 10 months old, or Hubby being diagnosed with cancer 8 months later when baby #2 arrived.
It took us MANY years to finally get out of the hole we were in. I wish we had had you all those years ago!!
@Lynne, please keep in mind that the person you trust with your child’s future does Not have to be a relative. I know that everyone assumes it should be family, but it should be someone you Trust to Love and Care for your child. Sometimes it is a family member, but often it is a best friend who would Truly care for your child the way You would want them to be cared for. You can Always change that in the future, but at least you would be covered just in case.
January 14, 2013 at 12:12 pm
Great advice Gail! I wish I had known that I would be making less than half my salary for Maternity benefits BEFORE I got pregnant. Also, watch out the the Universal Child Benefit (the $100 they pay every month) – I owed the government money one year (only time) because of that – you have to pay taxes on it!
We, luckily, had a good head on our shoulders and had wills and life insurance in place before our children were born. I have realized recently that we need to update wills.
Parents also need to consider budgeting as kids get older. We are still paying before and after school daycare but are now also paying for activities for the kids (ex. hockey). Yes, a choice, but definitely needs planning.
Congrats to all the parents-to-be! As someone once told me, “It’s the most exhilirating roller coaster ride of your life!”
January 14, 2013 at 12:14 pm
Great post! We have been planning to have a baby and have just decided that until we do I will be living on my estimated mat leave benefit (less than half of what I currently earn). I’m going to divide the “excess” money between savings and credit card debt. The goal is that by the time we have a baby I will be used to the lower pay, have no credit card debt and enough money in savings to cover any unexpected expenses.
I have already been using the budget sheets and am trying to “fake it ’til I make it” (a baby that is). The way that I see it I have at least 9 months to practice living on less before it’s not an option.
January 14, 2013 at 12:35 pm
Man we just threw ourselves right in the deep end, buying a new house (from condo living) and having a new baby weeks apart. Biggest financial challenge was cost of daycare + diaper + formula – we’ planned on breast feeding but ran into latching problems. Now at age 5, we’ve decided to put our son in private school so a cost I’d mentally prepared to be free of this year (daycare) has been substituted by an even more expensive cost (tuition). It never ends. But it’s the best job in the world, and made possible by our decision to have only one child.
January 14, 2013 at 12:48 pm
I am currently on mat leave and I am one of the lucky few who also gets top up from my employer. I end up making more money on mat leave than I did when I was working, namely because of the tax difference. In order to NOT owe taxes come tax time, I figured out how much I would need to contribute to RRSP (with the help of my financial advisors math skills lol) to offset my income enough to not pay taxes. I suggest this method to anyone going on mat leave who gets top up from their employer. Pay yourself, not the government!
January 14, 2013 at 1:59 pm
Great timing. I don’t have bio children. My husband and I are foster parents in the states. We have a sibling group that we are seriously considering adopting. I’ve been researching the adoption process but never gave one thought to anything after that. Now my husband and I will have to talk about who would be their guardian and figure out how much to increase our life insurance.
January 14, 2013 at 2:00 pm
all good advise. I’m 71 and the article made me remember that when I got preganat with our first I was a teacher and had to quit working when I started to show!!! That was almost 49 years ago. No maternity leave, I didn’t get EI and my husband was a corporal in the Air Force …read minimal pay!! What a struggle. I’m glad things have changed for this generation.
January 14, 2013 at 2:13 pm
Thanks, I really needed to hear this as the planning is going to transition into the trying shortly. Need to get all my financial eggs in order before we try to fertilize some other eggs.
January 14, 2013 at 2:50 pm
Heather, your egg jokes CRACK ME UP!
January 14, 2013 at 5:05 pm
Does anyone know where I can find Gails book tour dates and locations?i have tried searching, but unable to find it.
Thanks.
January 14, 2013 at 6:31 pm
Alyssa, click on the Gail News on the right hand side of your screen.
January 14, 2013 at 10:44 pm
As a single mom and no family options, It took me a long time to find guardians for my young kids. But I chose a family that had the same beliefs, religion, and financialy able to have 2 more kids. They have 2 kids of their own and mine would be well looked after. I’m almost more stressed about where my first is going to kindergarten now that the “guardian” has been taken care of.
January 15, 2013 at 2:26 am
Alyssa,
If you’re on Facebook join Gail’s page by liking it and they’ll be tour dates on her main page.
It was such a pleasure to meet her on Sunday. What a special lady.
January 16, 2013 at 4:18 pm
There’s actually a program with Service Canada that self-employed people can sign up for that gives you maternity, parental, sickness and compassion benefits. It’s called Employment Insurance Special Benefits for Self-Employed People (http://www.servicecanada.gc.ca/eng/sc/ei/sew/index.shtml).
There’s obviously some eligibility requirements (such as Canadian citizen or permanent resident and have to earn a minimum of $6222 in earning). You register for the program but you have to wait 12 months before you can make a claim.
“For 2012, the EI premium rate is $1.83 per $100 of insurable earnings, and the maximum insurable earnings are $45,900…..This means that, for 2012, the maximum annual amount one will pay in premiums is $839.97.”
You pay the premiums at income tax time.
“For 2012, the maximum weekly benefit is $485 per week. If you have self-employed or other earnings while receiving benefits, her benefits could be reduced.”
I am in no way affiliated with this program. I heard about it when I was a postdoctoral fellow (a trainee position with no benefits) but since I made my own hours, I was eligible. I was in a committed relationship and wanted to have kids, so I joined the program.
HOWEVER, you can cancel your partipation in the program for only 2 reasons. 1) if you do it in the first 60 days after joining the program (you won’t have to pay any premiums).
2) after the 60 days, if you haven’t made any claims. You will still have to pay the premiums until dec 31st of that year.
If you have made any claims, you will have to continue to pay premiums your entire self-employed career.
January 21, 2013 at 10:04 am
we selected a friend and a family member for guardian options for our youngster….also agreed to be guardian for a single mom friend in another country! I realize that would be a challenge but we’ve been friends longer then we’ve known the daddy’s and I would never say no when it comes to providing care for her 2 kids should the unthinkable happen. Just remember that you should only agree to the total # of kids you can actually care for IF they all needed your care at once. Don’t over agree.
January 22, 2013 at 1:33 pm
Great points! What I see in my practice is that so many people delay the will. It is indeed a morbid thought and no one wants to think about the worst but it is indeed a necessity. Prepare for the worst and hope for the best.