What does a kid really cost?

It seems like every time we turn around, there is a new study released about the cost of raising a child in Canada. A quick Google search will tell you that it’s well over $1,000 per month and somewhere in the neighbourhood of $250,000 over 18 years. We know, after building over 140,000 financial plans across the country, that only 41% of Canadian parents are using an RESP to get free government grants, over half of Canadian parents have zero life insurance to protect their kids, and Canadian parents owe 26% more on credit cards and 44% on mortgages than non-parents. These statistics look the way they do largely due to the increasing cost of raising a child, but there are major problems with trying to come up with a one-size fits-all cost when it comes to raising a child.

First of all, the cost of living can vary a lot depending on where you live. For example, infant care that costs $7,812 per year in Winnipeg will set you back $21,096 per year in Toronto. Adding an extra bedroom to your home will also cost a lot more in Vancouver than in Charlottetown.

Another issue is that the cost of raising a child will not be spread out evenly over time. For example, you won’t need to spend money on diapers or daycare forever, but before you know it, it’s time to think seriously about saving for post-secondary education. In other words, there are different types of costs at the many different stages of life.

Then there’s the question of your overall household income and lifestyle choices. Are you the type of family to keep things simple? Or are you looking forward to lots of sports, activities, lessons, and trips to Disney World?

OK, this is going to take a bit of work

To get a realistic idea of what you will have to spend, here are the major categories to think about, and some tips on how to find a number that is realistic for you.

If you think you’re going to need more space, hop onto realtor.ca and take a look around. 

Most kids will eat less than a grown adult, but feeding them is still pricey, especially with the convenience foods that most parents will find come in real handy. Plan on spending the same amount per month for your child as you do for yourself.

As I mentioned, this varies a lot by region. The most accurate way to figure out what the cost is in your city, ask friends in your area what they’re paying. You can also check out this article from the CBC that breaks down the cost across many different Canadian cities.

This one’s a wildcard that’s really in your control. You need to think about the things you plan on doing, and how a child will change the cost. Infants generally fly for free, and kids 2-12 fly with a reduced fare. Hotels generally won’t charge for a youngster. Tickets to Disney World are shockingly expensive.

This is another subjective one. Clothes don’t last long when a child is getting bigger every year. Scanning the various opinions out there (and chatting with our CEO, Eric Arnold, who is a father of four under five), it seems like you could take advantage of sales and hand-me-downs to get by on a few hundred dollars per year, or you could spend an almost unlimited amount. You decide.

The best way to save for a child’s education is with a Registered Education Savings Plan (RESP). You invest your money in this type of account and the government matches 20% of your contributions up to $7,200 per child. It’s a great deal. You can even get grandparents and other relatives to chip in. Just build a free financial plan to see what an RESP can do for you.

You’ll be spending a bit more on everything from toothbrushes to bed linens to movie tickets to gas and hydro. Try to notice what you’re spending on these things and add perhaps 20-30%. These baby experts say diapers will cost you $72 per month. As your child ages, bigger-ticket expenses come into play, such as iPhones, trendier clothing and maybe even a first car. You can also use our monthly budget calculator to keep tabs on how much you’re actually spending.

The expenses can quickly add up, but support is available from the government. Maternity leave benefits can replace up to 55% of your income for 35 weeks. Depending on your income, the Canada Child Benefit can provide assistance of up to $6,496 per year.

If you qualify for an annual HST/GST credit, the amount you receive may be higher with children. There’s financial support for children with disabilities, and the RESP program mentioned above to help with college or university. It’s also worth looking into the provincial and territorial programs where you live.

Oversimplified answers about the cost of raising a child are not much use. That’s why we built a child affordability calculator that captures all of these variables and gives you a more customized answer. 

One thing you should spend a few minutes doing right now is building a plan to see what you need to do be doing to sustain your lifestyle throughout parenthood and into retirement. It’s all about reducing the cost of your borrowing, taking advantage of great, low-cost investment opportunities, and protecting your family with the right insurance.

Updated on June 25th, 2019