So You Want to Have a Baby in 5 Years?

by | Aug 28, 2018

Before we jump in to helping you prepare your finances for parenthood, we want you to know one truth: you can be a phenomenal parent without being good at money. We didn’t put together this set of tips on how to prepare for a new baby just to add one more item to your guilt-list of things “all good parents do”.

We want to help you to get your finances organized before a new little human enters your life in order to make that to-do list smaller. You need mental space to raise children well, and stress over money has the potential to hog so much real estate in your brain that it leaves precious little room for handling sleep deprivation, inexplicable crying, weird rashes, and even those moments of unbelievable joy.

The last thing we want is for you to fumble through an EI application in the middle of the night with a crying baby beside you, or fall for a group RESP scam scheme because you wanted to do right for your kid and just didn’t know any better. Let’s put your amazing and soon-to-be-lost ability to focus to work and prepare your wallet for parenthood.

If you have 5 years…

Save. That’s it; our big tip if you think you’re five years away from having a baby is to save those dollar bills. Find ways to sock away as much money as you can. If you want to skip ahead, you will find below our suggestions for structuring your cash flow so that you can spend with intention, and save without feeling deprived in the years before your new family member(s) show up.

If you have 2 years…

Figure out Maternity and/or Parental Leave

If you’re an employee, you’ll want to get familiar with your workplace benefits, and – as much as it pains us to say this in 2018 – you might need to keep your inquiries on the down low as much as possible. Your employer can’t fire you for taking maternity and parental leave, but giving yourself time to investigate quietly without giving anything away until you’re ready is a good insurance policy against their potential to royally screw up employment law.

What to look for:

  • When are you required to give notice before leaving for or returning from a maternity or parental leave? What format does notice have to take (for example, are there forms to submit?)
  • Can you bank vacation days to extend your leave?
  • Does your employer pay a top-up benefit for part or all of your leave? If so, how much will it be? What are the rules? Would you have to pay that benefit back if you don’t return to work when your leave is over?
  • Can you continue participating in group benefits like life, disability, and extended health, and how will premiums be paid when you don’t receive a paycheque?
  • What have other parents experienced while on and after maternity/parental leave? Was their specific job actually there when they returned? Were they still included in events? Was it easy to return to work or were they shut out in different ways?

If you’re self-employed, you’re in charge of creating your own maternity and/or parental leave policy, which can be even more confusing. Your preparations might include:

  • Hiring a replacement to do all or part of your job
  • Saving up a reserve to draw on
  • Partnering with a colleague to take on your customers until you come back
  • Communicating with your customers about what this period of time will be like for them
  • Getting realistic about how long you may actually need for leave. Many new parents plan for only a few weeks or months, and then find that due to health or other reasons, this whole new baby thing turned out differently than expected. Plan for both the best and the worst case scenario.
  • Determining whether or not to take advantage of EI if you’re outside of Quebec. Inside, it’s not an option – you’re on QPIP. More on that, below.

Estimate the Employment Insurance (EI) or Quebec Parental Insurance Program (QPIP):

Again, employees and self-employed folks will approach this task a little differently. We put this piece very early in the timeline for good reasons we’ll expand on below. For now, just trust us and figure this out well ahead of time.

Employees, your job is to estimate how much money you’ll receive from either the federal or Quebec government over the length of your leave. If you work irregular hours or aren’t sure what your insurable hours will be during the qualification period, a quick and dirty way to estimate your benefit is to use last year’s line 150 income from your tax return and apply the following formula:

  • If your income was higher than $51,700 (and you think it probably will be the year before you apply for benefits), assume you’ll receive the maximum benefit.
  • If your income was lower than $51,700 (and you think it probably will be in the year before you apply for benefits), divide your expected income by $51,700 and multiply it by $547. This will give you a rough estimate of your weekly benefit.

If you’re self employed outside of Quebec, you have the option of voluntarily contributing to EI (QPIP is mandatory for all workers, even self-employed ones) so that you can receive benefits from the program while on leave. Be really careful considering this option, however, since once you start paying premiums you can’t opt out at a later date. You also have to make 12 full months of contributions before you can start receiving benefits, so timing is key.

In any case, we do hear frequently from new parents that they end up owing tax on their EI/QPIP income and really hadn’t expected this. Often this is due to the fact that you earned your regular salary in the beginning of the year, which was taxed at this rate, and then you earned EI/QPIP the balance of the year, which was taxed at that rate. When you have a good idea of when you might actually be taking income, stop and run a tax estimate – or ask your friendly neighbourhood financial planner OR tax advisor to do it for you – and determine how much of your EI you may have to sock away for taxes.

Test-Drive Your Budget

Finally, the reason we want you to estimate your income well before welcoming a new human into your world: if at all possible, we want you to get practice living on a reduced income.

Living on an artificially lower income today lets you assess whether you’ll be able to do it successfully when it isn’t artificial, with the added benefit of putting money into your savings account. But lowering your expenses doesn’t mean a freeze on spending.

Here is one way to create a spending and savings plan:

Step One: What is Your “Why”?

Without a strong connection to your “why” it can be challenging to really implement this plan. It may be that practicing for baby is a strong enough reason, but when babies are fictional that can be tough. Find a way that is meaningful enough to keep your hands out of the cookie jar when it starts to fill up.

Step Two: Stop Tracking Your Expenses


Yep. That’s what we said. Looking at the past doesn’t change anything, and it tends to be really exhausting. This isn’t permission to spend without intention – it’s authorization to build a plan that feels great and works.

Step Three: You Do Still Have to Know Some Things

Get to know what your fixed expenses are. These could include mortgage or rent, insurance premiums, hydro and electric bills, Netflix, internet and cable, mobile phone or even landlines. What does it cost for you to just wake up every day with a roof over your head, the lights on, your transportation sorted, and your devices operational?

Let’s say that this amount is $2,500*.

This is your first account. That $2,500 amount is going to go into a single account, every pay period, so that no matter what happens, those bills and fixed expenses are paid. They’re just dealt with, whether they’re on autopay or you manually pay them on your monthly Money Day**.

Now, let’s figure out the other stuff, your variable expenses. These could be your groceries (rarely the same each month), your vehicle fuel, your dining out (yes, you’re allowed to have fun), your clothes and shoes, personal care, health care, and all those other bits and bobs you need to just be okay. These could also be annual expenses like your car insurance or property taxes that are paid once a year.

Let’s say that amount is $1,500*.

Step Four: Open Some Accounts!

Use some no-fee online savings accounts with your bank to create funds for your annual expenses, so that you can feel confident that the money is there when those bills come due.

What’s left? Let’s say that’s $1,500*.

How much would you have left if you were on leave? Let’s say that’s negative $1,000*. And you know you’ll have baby expenses like diapers and clothes and the occasional babysitter. Yes, you will need an occasional babysitter. We like you sane.

Now we’re talking. With all those estimates, you can start socking away money into another one of those online, no-fee savings accounts.

But Wait… there’s more!

Of course there is. We’ve just started with the basics, and we know you need to know more. We’re working away on a comprehensive handbook just for you. We’re not going to give you a timeline just yet because… well, you may hold us to it, and we hate disappointing you. But it’s coming. In the meantime, get started on all of the above, and we’ll have it to you (hopefully) before your new human makes an entrance.

*These are not intended to be realistic numbers. These are just numbers.
**A monthly Money Day is SUCH A GOOD IDEA. You get your statements from last month, and your plans for the month ahead. You figure out what worked and didn’t work last month. You figure out what you need to have happen next month. You plan your money into all your accounts, and then you reward yourself with a dinner or a movie (in or out, at your preference) or something else that feels like 5 enormous gold stars.