Having a child
The arrival of a new baby is a joyful time, but it's also a time of major lifestyle changes! That's why, more than ever, it's important to put all the odds in your favour to ensure your family's financial stability.
Here are 3 steps and tools that will help you adjust your finances and make the most of these special moments:
1. Adjust your budget
From now on, your monthly budget must include a new line item: baby expenses. Diapers, bath products, formula (if you are not nursing your child) and child care expenses are examples.
As for toys, clothing and baby furniture, don't hesitate to call upon your friends, family and co-workers. They will be happy to provide you with gifts or their last child's entire set of baby clothes.
Buying only new could easily cost you several thousand dollars. Now that's something to consider.
When you draw up your new budget, take into consideration the tax deductions and government benefits you will now be eligible for as parents.
2. Review your insurance needs
With little Samuel or Emily now safely in your arms and cooing way, you need to think about what would happen to your child if you or your spouse passed away.
A financial planner or financial security advisor can help you evaluate your insurance needs based on your means.
He or she may, for example, recommend you take out life insurance, or change your policy if you already have it. In the event of death, your beneficiaries will receive a tax-free amount to help them meet financial obligations such as the mortgage, educational expenses, etc.
If your employer has no group insurance plan, you could take out disability insurance, or critical illness or long-term care insurance. This kind of coverage allows you to maintain your income in the event of illness or disability without depleting your savings.
If you have group insurance, think about contacting the insurer and making some changes: add the child to the policy, and change your life insurance beneficiary if needed.
3. Draw your will
Surprised? It's a normal part of the process. The birth of a child is an excellent opportunity to start your estate planning, especially now that you have descendants.
To make your loved ones' lives easier in the event of death, draw up a will, a mandate in case of incapacity (power of attorney) and a living will. Each spouse must make his or her own.
If you are not married, a will is even more important. If you pass away without a will, your common-law spouse will not be considered an heir and will get nothing at all.
If you live in a de facto union, see an attorney or notary to draft or review your cohabitation agreement. This document lists each of your rights and obligations. Its goal is to protect each spouse and compensate one of them for any additional contributions made at the time the relationship was formed. It greatly facilitates things in the event of separation.
Once you have a clear idea of what you want to leave to whom, let your loved ones know why you made the choices you did. By doing this, you'll reduce the risk of conflict or that someone contests your will in the event of death.
If you've already done your estate planning, you may want to make changes to it now that you are a new parent.