Courtesy Worldsource Financial Management
If you are about to become a parent you will soon learn what other parents already know – that children are expensive! And, as is the case with boomerang kids, sometimes they are an expense that comes back. However, the expenses associated with our children are an expense that we can live with. According to a recent TD Bank study, one-in-five boomers (a person who was born in the years after World War 11 between 1946 and 1964) admit they would put their own financial security at risk to help their children.
So how much is the cost associated with raising a child?
Unfortunately, from a Canadian perspective, there does not seem to be as much quantifiable data on this subject as there is in the US. The US Department of Agriculture provides an annual report on the cost of child rearing until the age of 18, and last year that average number was $235,000 until the age of 18. That number is up $210,000 from 1960 when the cost to raise a child from birth until the age of 18 was just over $25,000. Of course once inflation is factored in $25,000, 50 plus years later looks a lot more like over $200,000.
Some costs to consider include maternity leave and the lost wages due to time away from work, child care, food, clothing and shelter, as well as necessities such as strollers, cribs and for teenagers lets not forget iPhones and iPads.
Some strategies that parents can take to ease the financial burden include applying for some of the following programs:
Universal child care benefit (UCCB) – this program provides parents with a taxable benefit of 100/month/child under the age of six. As this is a taxable benefit it should be claimed by the lower income earning spouse. Enrolment for the UCCB is processed through the Canada child benefits application.
Canada child tax benefit (CCTB) – this program provides a tax-free monthly payment that is paid to eligible families to help them with the cost of raising children under age 18. Associated programs that fall under the CCTB include the National child benefit supplement and the Child disability benefit.
Child tax credit – this is a federal tax credit of $2,191 for each child under 18 which works out to a tax savings of around $329 per child.
Child care deduction – this is a deduction, as opposed to a tax credit, and as a result lowers the taxable income of the parent with the lower income, who may claim up to $7,000 in expenses for each child under the age of seven and $4,000 for children age seven to 16. Parents should be aware that eligible child care expenses include the cost of summer camps.
Tuition, education and textbook amounts – These tax student credits (if unused by the student) may be transferred to a parent, grandparent, spouse or common law partner up to a maximum of $5,000.
Transit passes cost – Public transit passes used by children who were younger than 19 at the end of the tax year can be claimed by either parent (including common-law partners).
Talk about budgeting and saving!
It’s never too early or too late to start talking to your children about the importance of budgeting and saving. In fact there are even a few savings strategies that parents may want to consider beyond contributing to a Registered Education Savings Plan such as establishing an investment plan in the name of your child with the proceeds received from the CCTB and UCCB as any investment income earned is not attributed back to the parents.
The joys of being the diligent parent never end!