The Cost of Raising a Child in Canada

Before my daughter was born, I often asked myself and my friends, how much does it cost to raise a child in Canada? Most estimates for the cost of raising a child in Canada are in the $10,000 – $15,000 a year range until the age of 18 in Canada. That seemed a bit high, but at the time, it was an estimate I used.

The reality is that raising children in Canada has become difficult for many middle-income families. That’s because the cost of living in many cities has become insanely expensive. In fact, your rent or mortgage will often be your largest expense.

The idea behind this post is to give you an average cost of what you’ll spend as a new parent in Canada. That said, if you’re American, many of the rough estimates will also apply. Regardless of if you’re a new parent or thinking about having a child, here are some of the costs to consider when raising a child.

Housing costs

When budgeting for a baby, many people forget to consider housing costs. It doesn’t matter if you’re renting or have mortgage payments; your childcare costs can be significant based on where you live. Major cities such as Toronto and Vancouver have high rent and housing costs. If you live in rural areas or smaller cities, your housing costs may drop, but then you may spend more in other areas.

The cost of housing will always be a concern. Families that grow may require more space, which typically means higher costs. Plus, moving can be expensive. You’d also have to spend more on utilities.

Maternity employment insurance

Maternity leave in Canada covers up to 15 weeks. You can take this paid leave during your pregnancy or after you give birth. After your maternity benefits run out, you can take standard parental leave up to an additional 40 weeks or 69 weeks for extended parental leave. During this time your employer must save your position, and if you’re lucky, they’ll offer some kind of top-up, but if not, maternity employment insurance will help you get by. Employment insurance is meant to replace 55% of your weekly earnings up to a maximum of $650 a week.

Those taking extended leave only get an income replacement of 33% up to a maximum of $390 a week. You’ll hit the cap if your salary is $61,500 or more. To make matters worse, the income is taxable.

Most couples choose to take the leave one after the other, but you could take it simultaneously if you wanted. Whoever has the better top-up benefits should take more time off, but try telling that to the woman who just carried and delivered a baby.

Start-up costs

New parents typically spend a lot when their first child arrives. The cost of a child will vary by family, but some expenses to factor in include:

• Car seat
• Crib
• Formula
• Stroller
• High chair
• Childcare expenses
• Diapers

Even when your kids get out of daycare and diapers, there will still be many expenses that come out. You’ll have to pay for things such as school supplies, extracurricular activities, summer camps, braces, personal care, uninsured healthcare, and more.

The cost of raising children is expensive, but it’s not like you need to accept the price tag of everything you see. Many things can be bought second-hand, which helps reduce the cost of raising kids. Trust me, newborns will not care if their clothes are new or gently used.

Also, if you keep your kids’ stuff in good condition, you can resell them later. That will reduce your total cost overall.

Child care costs

Where you live will determine your daycare costs. Licensed daycare in major cities can cost up to $2,000 a month. Unlicensed home care is a cheaper solution and is worth checking out. Note that some daycares will charge more based on your child’s age. Regardless of which route you decide on, there are limited spots, so put your child’s name on a waiting list as soon as they are born (if not earlier).

With the cost of child care so high, it might even make sense for one parent to stay home for an extended period. MoneySense has a great article on how to find and pay for child care. My wife and I checked out close to a dozen daycares before settling on one that made the most sense for us. We were fortunate that our first choice had availability when we needed it.

In Canada, there is $10-a-day daycare available, but not every childcare facility offers it. As you can imagine, the ones that do have a very long waitlist. 

Other considerations include nannies and private schools. Nannies can live with you, but that will cost more. Private schools often provide before and after-school care as part of your annual expenses. No matter what you settle on, the cost of childcare will add up.

Life insurance

Once you have dependents, life insurance for Canadians is an absolute must. Our children depend on our income to get by, so having a policy will leave them with enough money to get by until they become self-dependent adults.

If you’re young and healthy, term life insurance is affordable at roughly $25-40 monthly in insurance premiums. Generally speaking, the amount you want to get is enough to cover the funeral costs, the balance of your mortgage, and the cost of a college education. Getting life insurance is easy as you can do it all online via companies such as PolicyMe. You’ll still get access to licensed advisors. There’s just no need to meet face-to-face since they walk you through the policies.

Since I’m being all morbid, don’t forget to get your will done. Many people still prefer to go to a lawyer to get their wills done, but they can charge a fair amount. DIY wills kits aren’t bad, but I think there’s a better solution now in Willful. With Willful, you can create a legally binding will online. You only pay for it once and you get unlimited updates for free. Willful makes creating a will quick, easy, and inexpensive. Click my Willful affiliate link and use promo code MONEYWEHAVE15 to get $15 off your will.

Registered Education Savings Plan

Setting up an RESP isn’t mandatory, but I would consider it a cost of raising a child in Canada. You can get $500 free every year through the Canadian Education Savings Grant. The grant gives you a 20% match on the first $2,500 you save every year until your child turns 17, with a lifetime maximum benefit of $7,200 per child. Contributions aren’t tax-deductible, but any gains would be taxable under your child when withdrawn. Since your child typically won’t have much income, the gains are usually tax-free.

Lower-income families could potentially get a higher match, and they can access up to $2,000 to help kick-start their child’s RESP through the Canada Learning Bond. The money is completely free; no fees and no additional contributions are required.

The cost of college and university is expensive. While students can apply for loans, that’s often based on family income. In other words, if you have a high family income and haven’t saved for your child’s education, there’s no guarantee they’ll get approved for a loan later.

If setting up an RESP and investing is freaking you out, consider using a robo advisor such as Justwealth. Robo advisors have low fees and automate their investment strategy. All you need to do is set up an account and choose the year your child will graduate from high school. The robo advisor will then invest and balance your RESP with that target date in mind. When you sign up for Justwealth through my referral link, you’ll get a $50 bonus.

Canadian Child Benefit

The cost of raising a child in Canada is offset by the Canadian Child Benefit, which provides up to $6,997 per year ($583.08  per month) for each eligible child under the age of six and up to $5,903  per year ($491.91 per month) for each eligible child aged six6 to 17. This benefit was created with lower-income families in mind. If you’re in a household that earns a middle-income or higher income, there’s a possibility that you won’t qualify for the Canadian Child Benefit. Some people find that unfair as they may still have to pay for childcare and other expenses, but I don’t mind the current system. Use the child and family benefits calculator to see what you’re entitled to.

Food costs

When your child is an infant, food costs will be minimal you’re breastfeeding. Of course, not everyone can breastfeed, so if you need to purchase formula, you’ll need to budget for that. Even when your kids get to preschool age, you probably won’t spend more than an additional $100 per month to feed them. 

However, every child is different. Some kids eat a lot, so your monthly grocery budget could increase quite a bit. You’ll be shocked at how much fresh fruit your kids go through. My daughter is six now, and I’m spending about $100 a month on groceries a month for her alone. That said, I have friends that are spending double that because their child eats a lot. Can you imagine how much food will cost when they’re teenagers? 

Miscellaneous expenses

The above costs are good estimates for major expenses, but many people will forget about he miscellaneous expenses that add up. You won’t need to budget for all of the following right away, but it’ll be something that you’ll want to think about.

• Haircuts
• Clothes
• Sports equipment
• Classes
• School fees (field trips, pizza lunches, etc.)
• Activity books
• Subscription programs and apps
• Car seat

Final thoughts

Having a baby is a serious decision that should be made with our finances in mind. Most parents will divert all their savings toward their children, but it’s foolish to ignore your own retirement savings in the process. While trying to budget the average annual cost of having children is nice, the reality is that the real costs will always be unknown. Married couples that have dual income will often be in a better position than a single parent. However, just because you’re a married couple, that doesn’t mean raising a child is any easier.