The Financial Guide to Having a Baby

For residents covered by a provincial or territorial health plan, medically necessary hospital and physician services are generally covered, but eligibility, services, and extra charges vary. Gear, supplies, childcare, uncovered health costs, and income changes also vary widely. Build a household estimate from current local prices and your own leave and childcare plans.

Canada's Employment Insurance (EI) program provides income replacement while you're off work with a new baby. There are two types of leave: maternity leave (for the person who gave birth) and parental leave (for either parent). You must have accumulated at least 600 insurable hours in the past 52 weeks to qualify.

The Canada Child Benefit is a tax-free monthly payment from the federal government to help families with the cost of raising children. It's one of the most impactful financial supports available to Canadian parents. In most provinces and territories you can apply when you register your baby's birth by agreeing to share the information with the CRA (this option isn't available in Nunavut); otherwise, apply through your CRA account or with Form RC66.

1. 1Register the birth with your province or territory (most hospitals provide the forms).
2. 2File your taxes every year, even if you have no income — CCB is calculated from your tax return.
3. 3If you have a spouse or common-law partner, both of you must file taxes for the family to receive CCB.
4. 4Payments are recalculated every July based on the previous year's tax return.
5. 5If your family situation changes (separation, new child, custody change), update the CRA immediately.

A Registered Education Savings Plan (RESP) is a tax-sheltered account specifically for saving for your child's post-secondary education. The real power of an RESP is the free government money: for every dollar you contribute (up to $2,500/year), the government adds 20 cents through the Canada Education Savings Grant.

• Open an RESP as soon as you have the baby's Social Insurance Number (SIN) — apply for the SIN when you register the birth.
• Contributing $2,500/year from birth to age 17 = $45,000 in contributions + $7,200 in CESG + investment growth.
• At a 6% average annual return, $2,500/year for 18 years grows to roughly $95,000–$100,000 including grants.
• If you can't afford $2,500/year, contribute whatever you can. Even $25/month gets you $60/year in CESG.
• Compare plans before you sign. Group (pooled or scholarship trust) plans can have enrolment fees, required payment schedules and cancellation or forfeiture rules, so read the contract. Individual and family plans are usually more flexible, but fees and investment options vary by provider.

Individual vs. Family (Shared) RESP

What Happens If Your Child Doesn't Go to School?

This is one of the biggest concerns parents have about RESPs. Here's exactly what happens to each portion of the money if your child decides not to pursue post-secondary education:

• Your original contributions — returned to you tax-free, no penalty. But investments inside the RESP can lose value and fees reduce what’s left, so the amount returned depends on how the plan performed.
• CESG grant money ($7,200 max) — must be repaid to the government. You don't get to keep the grants if the child doesn't attend a qualifying program.
• Canada Learning Bond — also repaid to the government.
• Investment growth (Accumulated Income Payments / AIP) — if the plan meets the conditions for an AIP, you can withdraw this, but it's added to your income and taxed at your marginal rate PLUS a 20% additional tax. If you qualify and have RRSP room, you may instead be able to transfer up to $50,000 of the growth to your RRSP and avoid the additional tax on that amount.

You can also name a new beneficiary, such as a sibling (relationship, age and grant rules apply), or keep the plan open in case your child decides to go later — an RESP can stay open for up to 36 years. "Post-secondary" includes college, university, trade school, apprenticeships, and many certificate programs — it's broader than most parents think.

Childcare is one of the biggest ongoing expenses for families with young children, and costs vary dramatically by province. The Canada-wide early learning and child care plan has cut fees in regulated spaces that take part, but not every centre participates, and fees and waitlists still differ by province and territory.

• Register for childcare waitlists during pregnancy — waitlists in major cities can be 1 to 2 years long.
• Licensed home daycares are often cheaper than centres and may have shorter waitlists.
• Nanny sharing (splitting a nanny with another family) can be cost-effective in expensive markets.
• Check if your employer offers childcare benefits, flexible spending accounts, or on-site daycare.
• Provincial childcare subsidies are income-tested — apply even if you think you might not qualify.

Beyond the CCB, the Canadian tax system offers several deductions and credits specifically for parents. Understanding these can save your family thousands of dollars per year.

1. 1Keep all childcare receipts — daycares, nannies, day camps, and before/after school programs all qualify for the child care expense deduction.
2. 2The lower-income spouse must usually claim the child care expense deduction. The higher-income spouse can claim it only in limited cases — for example, if the lower-income spouse was in school, was unable to care for the children because of illness or disability, or was in prison or hospital for part of the year.
3. 3If you pay a nanny, you're considered an employer — you must deduct CPP, EI, and income tax from their pay and remit to the CRA.
4. 4File your taxes on time to avoid CCB payment interruptions.
5. 5Track medical expenses for both pregnancy and baby — they can be combined on one spouse's return for a larger credit.

One of the biggest financial decisions new parents face is whether one parent should stay home. The math isn't always straightforward — the real cost of working is often much higher than people realize, and the net benefit of a second income can be surprisingly small.

The True Cost of the Second Income

Non-Financial Factors to Consider

• Lost CPP contributions: each year out of the workforce can reduce your future CPP retirement pension (though the CPP child-rearing provision helps).
• Lost RRSP contribution room: RRSP room comes from earned income such as employment or self-employment earnings, so a year at home adds little or none.
• Career re-entry difficulty: gaps of 3+ years can significantly impact earning potential, especially in fast-moving fields.
• Employer benefits: staying employed may mean keeping extended health, dental, life insurance, and pension contributions.
• Mental health and identity: both staying home and working come with unique stressors. Neither choice is inherently better.
• The CPP child-rearing provision can leave out months of low or no earnings while you were the main caregiver of a child under 7, if that raises your pension. Ask for it when you apply for CPP.

Having a child is one of the most common reasons Canadians buy life insurance — and for good reason. If something happens to either parent, life insurance ensures your child is financially protected. Both parents need coverage, not just the higher earner.

• Term life insurance (20–30 year term) is the most cost-effective option for young parents. A healthy 30-year-old can get $500,000 in coverage for $25–$40/month.
• The primary earner needs enough to replace their income for 10–20 years: a common rule of thumb is 10–12 times your annual income.
• The stay-at-home parent also needs coverage — replacing the childcare, cooking, cleaning, and household management they provide costs an estimated $40,000–$60,000/year.
• Consider your mortgage balance: if one parent dies, can the other afford the mortgage? Many families add enough coverage to pay off the home.
• Group life insurance through your employer (often 1–2x salary) is usually not enough. Supplement with an individual policy.
• Buy life insurance while you're young and healthy — premiums increase significantly with age and health issues.

Having a baby makes updating your legal documents urgent. A will that names a guardian for your child is the single most important legal step you can take as a new parent. Without one, a court decides who raises your child if both parents die.

Use this checklist to make sure you've covered all the financial bases before and after your baby arrives.

Before the Baby

After the Baby

Official Government Resources