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Looking online, I found a lot of simple answers. Some estimates even put the cost at as much as $300,000 over the course of raising them from birth to 18 years old. Many of the answers I read didn’t seem detailed enough, though. It’s one thing to claim that raising a child costs $300,000, but that number doesn’t truly reflect how it will fit your personal situation. Some of the issues not addressed in these types of estimates include: What about secondary education costs? Is the mother breastfeeding? Are you using disposable or reusable diapers?

Calculating the cost of raising a child in Canada

I came across some data compiled by Manitoba Agriculture (chart no longer online) that seemed to be detailed enough to give a true picture of what you can expect to spend on certain categories, by year. However there were two problems: The data was broken out by boys and girls and, more importantly, was from 2004.

The difference in gender was only about $500 more in food for boys over childhood. So I decided to average the numbers to represent any child. While it’s likely that certain categories have had more inflation than others, I used the Bank of Canada’s Inflation Calculator to increase all the expenses to 2013 levels, based off of the annual inflation rates of the past 9 years.

Even though they might not be perfect, the numbers I came up with should provide you with a reasonable expectation of what it will cost to raise a child from birth to 18 years of age. While the total is $197,285, you could remove the first year of food expense if the mother decides to breastfeed, or zero out the child care costs if one parent plans on staying home.

As you can see, there are ways to adjust the numbers in your chart to more closely reflect your family’s situation.

Age	Food	Clothing	Health Care	Personal Care	Rec, Reading, Gifts, School Needs	Trans- portation	Child Care	Shelter, Furnishings, Household Operations	TOTAL
TTL	$33,399	$16,524	$5,042	$4,100	$19,117	$4,837	$64,347	$49,919	$197,285
Inf	$1,783	$2,035	$167	$0	$0	$0	$5,403	$2,552	$11,940
1	$951	$525	$167	$132	$675	$0	$7,334	$2,714	$12,498
2	$1,024	$546	$167	$132	$675	$0	$6,151	$2,669	$11,364
3	$1,024	$546	$265	$132	$675	$0	$6,151	$2,624	$11,417
4	$1,367	$558	$265	$132	$675	$0	$6,151	$2,624	$11,772
5	$1,367	$558	$265	$132	$767	$89	$6,151	$2,624	$11,953
6	$1,367	$605	$265	$131	$862	$89	$4,501	$2,624	$10,444
7	$1,641	$583	$265	$129	$1,158	$89	$4,501	$2,624	$10,990
8	$1,641	$583	$265	$129	$1,158	$89	$4,501	$2,624	$10,990
9	$1,641	$611	$265	$129	$1,158	$89	$4,501	$2,624	$11,018
10	$1,958	$611	$265	$129	$1,158	$89	$4,501	$2,624	$11,335
11	$1,958	$611	$265	$129	$1,158	$89	$4,501	$2,624	$11,335
12	$1,958	$1,168	$308	$320	$1,124	$602	$0	$2,624	$8,104
13	$2,210	$1,168	$308	$320	$1,124	$602	$0	$2,624	$8,356
14	$2,210	$1,168	$308	$320	$1,138	$602	$0	$2,624	$8,370
15	$2,210	$1,162	$308	$426	$1,339	$602	$0	$2,624	$8,671
16	$2,363	$1,162	$308	$426	$1,339	$602	$0	$2,624	$8,824
17	$2,363	$1,162	$308	$426	$1,339	$602	$0	$2,624	$8,824
18	$2,363	$1,162	$308	$426	$1,595	$602	$0	$2,624	$9,080

I think this chart covers all the expenses of raising a child fairly well. If you are planning on having a baby, you can use this chart to help you get a reasonable idea of what you can expect to pay. For new parents, this is especially helpful so that you can plan out your budget for the first couple of years of your child’s life.

Factor your lifestyle into the numbers

You should also consider the cost of maternity leave as well as looking beyond that if a parent plans to stay at home for more than one year to raise the child. The cost of lost wages can have an impact on your family’s finances, so it makes sense to take this into account.

The chart does not, however, include the costs involved if you choose to help pay for your child’s further education. If you plan to do that, you might consider adding $2,500 a year into an RESP to get the maximum Canada Education Savings Grant.

It’s also worth noting that, in many cases, having multiple children doesn’t just double total costs in each category. Hand-me-downs can reduce clothing costs for subsequent children. Additionally, transportation costs are unlikely to increase at a rapid rate, since you won’t need a separate car or a completely separate trip.

After thinking about all these expenses and reduced salary, there is something you get to look forward: Tax breaks from the government. This includes the Canada Child Tax Benefit and Universal Child Care Benefit, as well as the spousal amount if a parent’s income is under $10,822. Other tax savings include claiming up to $7,000 in childcare expenses and up to $500 for the Children’s Fitness Tax Credit and another $500 for the Children’s Arts Tax Credit.

How Much Does It Cost to Raise a Child? appeared first on Canadian Finance Blog.

It would be nice to add a third story to our house, or dig out the basement. Too bad it costs hundreds of thousands of dollars to do so. Naturally, the next step we take is to find ways to cut back on our dreams. Compromise a little on the finishes, maybe, or save up for another year or two in order to make it happen. Eventually, we all think at one point or another, “maybe I’ll just do it myself”.

Now, if the project doesn’t need to be perfect, and if it doesn’t need to be safe, then that may be a good idea. Certainly you could pick up a tool or two from the local Home Depot, and with a few google searches you could have all the information and knowledge you need in order to accomplish that project – for a fraction of the cost. Is that always a good idea? No, of course not. Professionals are around for a reason. However, there is a fine line between what you can and should do in order to improve your own home.

Here’s three things we’re looking to do, and our thought process towards whether we should DIY or pay for help.

Work Bench

We’ve spent a lot of time outdoors recently. When we moved into the home it was clear that the previous owner enjoyed gardening. There was a lot of love, but unfortunately it hadn’t been cared for in quite some time. So we’ve done a lot of work removing the old, and putting in the new.

Now that we’ve cleared some space, we want to start work on more projects, and one of the first would be a work bench. Now, we could get a nice metal one from Canadian Tire, or the like, or we could purchase a wooden one from a number of local shops. Or, we could build it ourselves.

The materials may end up costing just as much as a cheap wooden work bench, but if we build it ourselves it can be the perfect dimensions, be built immensely strong, and give us a sense of accomplishment. Because it doesn’t need to be perfect, nor does it matter if it is “safe”, this is something that we would definitely take on ourselves in order to save some cash.

Underground Sprinkler System

We have quite a large yard and garden area. While it is all new and fresh to us, we don’t mind spending some time watering our new plants or keeping our grass green. Soon enough, however, the novelty will wear off. When that day comes, our growing green things will definitely suffer. So to avoid that, we will eventually want to get an underground sprinkler system installed.

Now, because I have done irrigation work, this is something that I would be comfortable doing. If I wasn’t already skilled with it, however, it may be something that I would want to get someone else to do.

In fact, my plan is to split the work between a local company and myself. I would do the majority of the work – the design, digging, laying of pipe, etc. However, when it comes to tapping into our main water line, that is something that I would get a local company to pull a permit for, do the work, and ensure that there are no leaks and no safety issues.

Kitchen Reno

Eventually, we are also going to want to do a complete kitchen renovation. I’m not sure if we’ll go as far as opening up walls, but if we did, that would be something we would immediately head towards the professionals for.

I’ve watched enough Mike Holmes to know that I should not be messing with structure. Likewise, as soon as there is some required electrical or plumbing work, that is where I would gladly pay a professional for their advice and expertise. I would definitely be willing to do all the heavy labour myself though in order to save on costs. I can do the demo, assemble cabinetry, and the like.

When it comes to DIY, where do you draw the line?

Do you DIY or Pay for Help? appeared first on Canadian Finance Blog.

It’s common to treat investing as a mystery that can only be penetrated by those with special insight and knowledge. However, buying stocks doesn’t have to a complex process.

Just about anyone can learn how to buy stocks with a little time and effort.

Getting Started

The first step is to open a brokerage account. It’s true that you need a broker in order to buy stocks. However, you don’t need to call someone on the phone, or become engaged in a complicated transaction. It’s possible to buy stocks through a discount broker online.

Brokerage accounts are fairly easy to find. I recommend Questrade and use them myself with both a TFSA and non-registered account with them. There are other low-cost brokerages such as Qtrade Investor and Scotia iTrade that you can open accounts with as well. As long as you have basic identifying information, and as long as you have bank account information for transfers of money, it’s possible for you to open a brokerage account.

You don’t need very much money, either. In many cases, it’s possible to open a brokerage account and start investing with as little as $100. Look for a reputable account online, and then open your account. Once you do that, you will be able to start buying stocks.

How to Choose Stocks

One of the easiest things you can do to get started with stocks is to invest in ETFs. These are groups of stocks that track the performance of a particular stock market index. Instead of trying to pick individual stocks, you receive the benefit of several stocks. You don’t have to try and learn how to buy stocks before you get started. A solid ETF, particularly one like XIU or XIC that tracks a wide market, can be a good way to get started.

Once you are investing, you can move forward and learn how to buy stocks on a more individual basis. Research information on the companies you are interested in, learning about how the companies are run, as well as the potential they have for future growth. Also, consider whether or not the stocks you choose are a good value. There are many different ways to evaluate stocks, and you can learn them and then apply them.

But the important thing is to get started. An ETF can help you get on track with investing, and start earning compounding returns, while you learn the ins and outs of how to buy stocks.

Make it Automatic

No matter how you choose to invest, and where you put your money, one of the best things you can do is to make it automatic. You want to make sure that you invest regularly, since that is a good way to make sure that you are earning returns over time. Decide how much money you can invest each month, and have the money automatically withdrawn from your bank account and used to invest in shares of an ETF or a particular stock.

As you earn more money, and learn more about investing in stocks, you can increase your contributions, as well as start finding other stock investments that are likely to help you reach your financial goals.

How to Buy Stocks: A Beginner’s Guide to Buying Stocks appeared first on Canadian Finance Blog.

We don’t need to farm or sew our own clothes in order to survive a cold winter. We don’t need to rely on our immediate neighbours to repair our vehicles or get some bread. We’re pretty lucky.

The problem with this incredible culture, however, is that we get really used to it. The reason the consumer culture works is because it promotes constant economic movement – and that means you spending your money on things. In order to combat that, save yourself a little cash, and learn to get uncomfortable.

Physically Uncomfortable

What temperature do you keep your house at? Are you comfortable in your own home? Now that we’re approaching summer, if you have a central air conditioner, it may be tempting to set your home to a “comfortable” temperature. How much money would you save, however, if you turned the AC off for a summer? It certainly isn’t the most comfortable option, but it could save you a ton of cash. Open the windows and embrace the heat.

When winter comes back around, try lowering your normal temperature by two or three degrees. You shouldn’t be able to walk around in your home in shorts and a t-shirt if it is the middle of winter. It doesn’t cost anything to put on a sweater or lug a blanket around the house. Again, it is not comfortable – but it would save you money.

Mentally Uncomfortable

What financial mistakes do you make in order to be comfortable? Do you carry cash around with you every day “just in case”? Do you notice that you regularly have to refill that wallet cash because it got spent here or there.

Spending cash is super easy when you have it accessible – making the decision to purchase something on credit should be more difficult choice to make. For me, I know that if I have cash lying around, I’ll find a way to spend it here or there.

What about your bank account? Do you have high bank fees that you’re paying just because the bank you always have gone there? Shop around, find a new bank, and transfer your balances. That’s not something super easy to do, but you could save yourself a lot of money by forcing yourself out of your comfort zone.

Emotionally Uncomfortable

I see so many people that just want everything to stay the same, day in and day out. It costs them a ton of money, usually indirectly, because it hampers their ability to earn more money or take advantage of limited time offers. They’re afraid of change, so they’re not willing to do what it takes in order to get financially ahead.

At your work place, for example, you are probably pretty comfortable in your day to day role. I’m sure you’ve thought about career advancement, assuming that it will come to you when you’re ready for it to happen. In reality, this is not how it works.

People get ahead by being proactive and expanding beyond their comfort zone. It may mean doing a completely different role, or it may mean going to a different company. If you really want to earn money, you’ll consider moving to a new city, or province, or country. That is how you take advantage of opportunities, by widening what you are willing to do.

What comforts are you holding on to in your daily life that are holding you back financially?

Learn to get Uncomfortable to Save Money appeared first on Canadian Finance Blog.

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However, it is important to note that this insurance is not meant to protect the buyer; it is used to protect the lender. CMHC insurance guarantees the bank or credit union that it will not lose money on this high ratio mortgage. If a borrower has more “skin in the game,” he or she is considered less of a risk. A 20% down payment usually represents a large commitment to the home, and a lender can feel reasonably sure that such a borrower won’t default on the mortgage loan.

How Does CMHC Insurance Work?

CMHC mortgage insurance is purchased to compensate the lender in the event that you default on your loan. Since it is the lender that is putting up the capital for your home purchase, the lender takes on the bulk of the risk of you don’t follow through. Insurance can help offset some of the risk involved.

It is the lender that technically pays the CMHC mortgage insurance premium, though the cost will pass to you. Many lenders add the insurance premium amount into the mortgage, so that you will not need to pay it immediately.

How much will CMHC insurance cost you?  There are three cost tiers for employed people with verifiable income:

• 15% to less than 20% down payment requires a standard insurance premium of 1.75%
• 10% to less than 15% down payment requires a standard insurance premium of 2.00%
• 5% to less than 10% down payment requires a standard insurance premium of 2.75%

There is also a premium paid on mortgages that are amortized over more than 25 years.

• Over 25 years, up to and including 30 years, carry an extended amortization surcharge of 0.2%
• Over 30 years, up to and including 35 years, carry an extended amortization surcharge of 0.4%

As you can see, the smaller your down payment, the more you pay in charges. On top of that, if you want a longer mortgage term (resulting in a smaller monthly payment), you have to be willing to pay the surcharge. The longer your mortgage term, especially when combined with a smaller down payment, the larger the chance that you default on your commitment.

If you want to reduce your costs, the CMHC has a program that provides a 10% refund on your premiums and no surcharge on extended amortizations if you purchase an energy eficient home, or if you renovate your home to make it more energy efficient. If you are environmentally conscious, this can be a great way to save a little money, as well as the earth.

While you would benefit from having a 20% down payment, in both interest and premiums saved, CMHC mortgage loan insurance serves a purpose by allowing people to buy a house with a smaller down payment. Being insured against loss, the bank is less concerned about the higher risk they take on, which allows the buyer to stop renting and start building equity in a home of their own.

Before you decide to buy a house, though, think about whether or not you can afford a bigger down payment. Weigh the costs and benefits of saving up for a down payment and paying less over time, or getting into a home sooner, but paying a larger amount over the life of your loan. Only you can decide which scenario is likely to provide you with the best use of your financial resources.

What is CMHC Mortgage Insurance? appeared first on Canadian Finance Blog.

There’s been quite a few problems with the cleaner, which shouldn’t be surprising considering the low price. When we turn the thing on, the whole house shakes with the noise of the powerful motor. Even worse, the designer thought it would be a good idea to have an exhaust blow air directly in front of the vacuum, meaning that any dirt or dust on a smooth surface will simply be pushed away from the vacuum instead of being sucked up.

It has, however, continued to work, and I can’t bring myself to spend a couple hundred dollars on a more effective cleaner. It is not as if I vacuum every day, and while it takes a little longer and my ears ring, the floors still get clean so I can’t complain too much. Unless, of course, the vacuum cleaner stops working.

This is a common dilemma for a lot of frugal people. They continue to use the same functional machinery, even if the face of frustration and disappointment. There’s always something better to spend your money on, and even though there is a tempting draw towards the new and shiny, the job still gets done with the old and boring. When something important or expensive breaks, is your first instinct to fix or replace?

Extend Usage with Proper Maintenance

The first time the vacuum cleaner broke, it wasn’t really broke, it just needed proper maintenance to last longer. The filter, which apparently should be replaced every 6 months, was about 2 years old, so the vacuum cleaner’s ability to suck up dust was severely compromised. I priced it out, and it ended up being that a new filter cost about $30 – which was about 2/3 of the cost of the original cleaner.

It almost felt like this was the classic razor situation, where the razor itself costs very little, but the blades cost just as much, if not more, than the handle itself. However, it was far less expensive than replacing the vacuum cleaner, so we bought one and stuck it in, and it continued to last for another year.

Small Repairs Can Be Cheaper Than Replacements

Just the other night, however, the vacuum cleaner gave up the ghost. It was simply not picking anything up any longer. We decided to do a little dissection of the vacuum mechanics to see if we could determine what the problem was. Two small screws later, we took off the front panel, saw that the belt was broken and that the brush was clogged by hair. So we removed the hair and decided we would look into how much replacing the belt would cost. Well, it was $5, so that means that the vacuum cleaner will live to deafen me for a little while longer.

One day, however, it will break beyond repair and we will replace it. Until then, I scour consumer reports and the sale section of the Dyson website, mostly just to make sure my bargain bin vacuum feels threatened enough to keep from blowing up in my face.

Generally speaking, if fixing an appliance or tool in your home costs just as much as replacing it, you should probably replace the device. If you’re going to fix it, be sure that you’re saving money up front. There’s no point in sinking money into something that will continue to fail in the short term. That’s simply throwing money away. However, don’t allow your first response to something breaking be to assume that you cannot fix it for very little.

I thought for sure my vacuum cleaner would need more repairs than $5 at the store and 5 minutes of my time, yet it continues to live and breathe. Explore your options, consider the costs, and then make an informed decision.

What is driving you nuts in your home that you’d love to replace?

Save Hundreds of Dollars Through Small Repairs appeared first on Canadian Finance Blog.

What are Canada Savings Bonds?

These are bonds that represent a loan to the Canadian government. You let the government use your money for operating expenses, and the government, in return, pays you interest. Since it’s similar to a loan, you also get your principal back. Since the Canadian government is considered among the most stable and trusted in the world, these investment vehicles are considered mostly safe.

If you want to purchase Canada Savings Bonds (CSBs), you will have to sign up through your Payroll Savings Program. Since November 2012, the purchase of CSBs is limited to contributions made through your work. There is a three-year term to maturity, and the interest rates are announced each year and remain in effect for the period. New rates are announced each year by the Minister of Finance, based on the market conditions of the time.

Another option is to purchase Canada Premium Bonds (CPBs). A CPB can be bought through financial institutions, as well as brokers and dealers. You can also purchase CPBs through CSB Customer Service. You can redeem a CPB at any time during the year, and the interest will paid up until the last anniversary date of issue (so it’s in your best interest to wait until just after the anniversary of its issuance to redeem a CPB).

If you are an existing Canada RSP plan holder, you can make new contributions through your Payroll Savings Program, using CSBs if you meet certain requirements. It’s also possible to purchase CPBs for your Canada RSP.

Safety = Low Returns

It’s important to understand that when you invest in Canada Savings Bonds you aren’t going to receive big returns. When it comes to investing, safety usually means a low rate of return. If you want potentially higher returns, you have to take on more risk. Even though there is an increased risk of loss with a riskier investment, you also have the chance to build more wealth over time.

As far as CSBs are concerned, it also doesn’t help that the current environment is so low-rate. Interest rates in general are low, thanks to prevailing market conditions. As a result, yields on all bonds are relatively low, even compared with what they have been in the past.

Bonds like CSBs and CPBs can make good additions to your portfolio if you are looking for some safety and stability. These types of investments allow you to keep a portion of your portfolio relatively safe, backed by the solvency of the Canadian government. For those in the income phase of their portfolios, or for those looking for capital preservation, CSBs can be a good choice. For those actively trying to grow their portfolio values, though, Canada Savings Bonds might not be the best option for a dominant investment.

Safe Investing with Canada Savings Bonds appeared first on Canadian Finance Blog.

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