The Cost of Raising a Child in Canada

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When my daughter was born, I knew the costs would add up quickly. Heck, even before she was born, I spent a fair amount to get things ready. It should be no surprise that the cost of raising a child in Canada is expensive! 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.

While that number certainly felt accurate while my daughter was in daycare, now that she’s in school, I find I’m not spending that much. The important thing to understand is that you don’t need to spend a set amount on your children to be good parents. If you can provide them with a safe and loving home, you’re doing great.

The idea behind this post is to give you an average cost of what you’ll spend as a new parent. It’s worth noting that the province and territory in which you reside will affect your overall costs. Admittedly, a lot of these points are slanted towards new parents. I’ve also included a few government programs that will give you income and grants for being a parent. Consider the following when thinking about the cost of raising a child in Canada.

The cost of raising a child in Canada

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 $573 a week.

Those taking extended leave only get an income replacement of 33% up to a maximum of $343 a week. You’ll hit the cap if your salary is $51,300 or more. To make matters worse, the income is taxable. Note that parents in Canada can now take up to 18 months of maternity leave, the payouts just get spread out over that period.

Most couples choose to take the leave one after the other but you could take it at the same time 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.

Life insurance

Once you have dependents, life insurance for Canadians is an absolute must. Our children depend on our income to get by so have a policy in place that 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 $30-40 a month. Generally speaking, the amount you want to get enough to cover the costs of your funeral, the balance of your mortgage, and the cost of a post-secondary education. Getting life insurance these days 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 at that time, 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.

If the idea of 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 really need to do is set up an account and then choose the year when 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.

Daycare 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. 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 personally checked out close to a dozen daycares before we settled on one that made the most sense for us. We were fortunate that our first choice had availability when we needed it.

Note that with the federal $10-a-day daycare deal in place, the cost of daycare will drop significantly over the next few years. Some provinces such as Quebec already have lower child care costs in place.

Canadian Child Benefit

The cost of raising a child in Canada is offset by the Canadian Child Benefit which provides up to $6,639 per year ($553.25 per month) for each eligible child under the age of six, and up to $5,602 per year ($466.83 per month) for each eligible child aged 6 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 to be 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.

Final thoughts

Having a baby is a serious decision and one that should be made with our finances in mind. Most parents will divert all their savings towards 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.

About Barry Choi

Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. His blog Money We Have is one of Canada’s most trusted sources when it comes to money and travel. You can find him on Twitter:@barrychoi

13 Comments

  1. Brian So on March 23, 2015 at 2:13 PM

    Families with young children are the target for tax relief from the government. The new Family Tax Cut and boosting of UCCB are recent proof of that, and I wouldn’t be surprised to see further benefits added in the future. That being said, they only cover a small portion of the cost of raising a child, so it shouldn’t weigh too heavily into your decision on having a child.

    • Barry Choi on March 23, 2015 at 3:29 PM

      Brian,

      Heh yes lots of tax cuts / credits this year since it’s an election year. I’m sure there will be more benefits to parents but the government won’t touch housing as if they trigger a crash they’ll be voted out.

  2. Chonce on March 24, 2015 at 11:14 AM

    Maternity leave benefits are really not that great in the states. But it seems like things costs a lot more in Canada. It’s still somewhat pricey to raise a child anywhere, but I cut expenses where I can. I couldn’t imagine paying up to $2,000 a month to put my son in daycare though, I’d probably rather just stay home if it came down to that.

    • Barry Choi on March 24, 2015 at 11:58 AM

      Chonce,

      Yes I read about the lack of benefits for U.S. citizens, just going to the hospital give birth will cost you a small fortune. Our day-to-day expenses and real estate costs more, but our health care is “free”. Many people do decide to stay home once they realize how expensive daycare is.

  3. Tawcan on March 25, 2015 at 2:28 PM

    Like Brian mentioned, a lot of tax benefits and credits you can claim for having kids to help you. Raising a kid can be as expensive as you want it to be or can be cost effective if you get used or 2nd hand items to reduce the cost.

    • Barry Choi on March 25, 2015 at 3:17 PM

      Tawcan,

      Yes there are indeed a ton of credits available, enough that it’s probably worth hiring an accountant to help you with your taxes when you have a child.

  4. Susan on December 3, 2017 at 7:32 PM

    FYI federal government employees have top up for maternity AND parental benefits.

  5. Thomas on February 14, 2018 at 1:41 PM

    To say nothing of things like
    -The cost of a new carpet when your child writes all over it with permanent marker. (It’s amazing how long you end up just living with it like that though!)
    – Bikes / hockey equipment that never seem to fit for more than a year,
    – Band instrument rental fees or sports registration fee (but probably both),
    – Auto insurance increase when they bring the family sedan home with a bent fender….or put a baseball thru the truck windshield (ok, it didn’t go thru, but it spiderwebbed 90% of it).
    Multiply it all by the number of children you have (3 in my case). Been there. Oh Barry, you have so much to look forward to!

    • Barry Choi on February 14, 2018 at 1:42 PM

      Thomas,

      Heh, my kid is only 7 months old and she’s already costing me a fortune. Lots to look forward to.

  6. Morteza on March 11, 2020 at 7:35 AM

    Wow, thank you for this useful content. best wishes

  7. Haylie on September 29, 2020 at 2:26 PM

    My child is 11 months old and has cost me $2700 including all initial purchases, breast pump rental, disposable diapers, and winter clothing for the season ahead. My baby was exclusively formula fed after 3 months. I also spent 16, 500 on an RESP fund. Makes sense to add the extra 14,000 lifetime contribution amount in year 1.
    One correction to the article is it’s 15w+ 35w for a standard parental leave.

    • Barry Choi on September 29, 2020 at 2:32 PM

      Hey Haylie,

      In 2019 a new rule was introduced where you can take 5 weeks of standard parental leave without affecting your spouse’s 35 weeks. Technically speaking it’s up to 40 weeks of parental leave you can take now, but there’s a maximum of 35 weeks available.

  8. Jen Laing on March 13, 2022 at 1:28 PM

    Hi It is very expensive to have a child and with all the government funding you you receive. I’m trying to tell my step daughter that wants to have a sperm donor so she can get pregnant; no partner, no life savings, no benefits, she has a job that pays ok but if she is sick no paid leave. Being a single mom for 3 years was at times hell. I had all the things my step daughter doesn’t have and it was still hard. Who will she turn to her dad that worked for his saving that he has. people have to realize it isn’t easy to raise a child when you have the finical needs. She is 28 but acts like a child herself. God help me.

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