Coast Capital Savings Credit Union

Coast Capital Savings Credit Union

June 24, 2008 11:47 ET

Coast Capital Savings Credit Union: Bringing Home Baby Without the Bacon

Preparing financially for maternity and paternity leave

VANCOUVER, BRITISH COLUMBIA--(Marketwire - June 24, 2008) - The plus sign on the pregnancy test usually brings about happiness for parents-to-be, but perhaps it should reveal a dollar sign instead.

Statistics reveal the first 12 months of a baby's life can cost more than $10,000(i). Preparing financially for a new baby can be overwhelming, especially on a reduced income. Many parents are surprised at the unexpected costs - after all how can someone so small cost so much?

Gayla Cook, branch manager at Coast Capital Savings Credit Union, and a mom to 13-month-old Evan, recommends parents follow a few simple steps to prepare financially for the joyous time ahead.

"Do the math," Cook said. "Find out how much you'll earn on leave ahead of time and create a budget. If you're eligible for Employment Insurance (EI), the basic benefit rate is 55 per cent of your average insured earnings up to a yearly maximum insurable amount of $41,100. This means you can receive a taxable maximum payment of $435 per week. So it's important to determine exactly how much you and your spouse will earn in combined income while you're away from work."

Krista Boyak, mom to 12-month old Sophia Allan, did just that. She started tracking her and her husband's expenses before going on maternity leave.

"I collected our receipts to look exactly at where our money was going," Boyak said. "I was shocked to learn how much we spent just on parking. I then made an effort to walk or take public transport more often."

After crunching the numbers, use it to set up a budget for your life in general, in addition to the extra costs of baby. Now that you will have another family member depending on your income, find out exactly how much money would be needed to maintain your lifestyle. Find areas where you can reduce spending. Don't forget to budget for regular baby expenses such as diapers, baby food and babysitting costs. Also, you may need to continue paying premiums to ensure your Medical Services Plan coverage and company health benefits do not cease, so factor this into your budget.

Cooks also recommends that parents-to-be try to have at least six weeks of their regular income available before the start of your leave. If you qualify for EI, your payment is usually issued within 28 days from the claim filing date. Parents must serve a 2-week unpaid waiting period before EI benefits begin to be paid. This, she says, means a parent may go six weeks without income.

"There are several ways to manage this waiting period," says Cook. "Your best option is to save before your bundle arrives. Alternatively, you can have a line of credit available to you at a low interest rate to help you over this period. Ensure you pay back as promptly as possible. Try to avoid high interest credit cards."

Cook offers the following additional tips:

- Choose a term deposit rather than a simple savings account as a way to put aside money for your parental leave, especially if you're planning for a baby in about a year from now. That's because you can get more return on your money by investing in a term deposit instead of a savings account. If you don't have the chunk of money required to open one, some investment vehicles, such as a Watch-it-Grow GIC from Coast Capital Savings, allow you to add to the term deposit monthly, instead of waiting to save up the initial $1,000 required.

- Do most of your baby shopping while you have a full income. Buy clothing and articles baby will need in advance over time, rather than purchasing these items after your income has dropped.

- While we all expect everything to go smoothly when we're on parental leave, it doesn't hurt to be well insured. If one spouse will remain working, are they well covered in case of short or long term disability? How about life insurance? You may also want to consider critical illness insurance, to ensure there is no drain on your finances in case of serious illness. Consult your financial institution for more information about insurance options.

In addition to the above tips, Cook says you should find out what resources are available to new parents. Government assistance, such as the Universal Child Care Benefit, Child Care Subsidy and the Canada Child Tax Benefit are benefits made to eligible families to help them with the cost of raising children. Find out if you qualify.

And be on the look-out for free stuff, she adds.

"Community centre classes, local libraries, parent groups, free chequing accounts and hand-me downs from family and friends can come in handy when financially managing an employment leave," says Cook. "As well, many employers have an employee assistance program that can help. Some offer a pre-parenting service that focuses on couples and women thinking of having a baby and includes planning around finances and work."

Parents like Mike Dezell say it's all worth it, even if they need to tighten the financial belts a bit. Dezell is on a year-long hiatus from his landscape business to stay at home with 16-month old son, Sam.

"We've been using our line of credit and making an effort to adopt a lifestyle that's a little less fancy," he said. "We've gone from two incomes and no kids, to one income and one child but I'd still recommend everyone take the opportunity to do this."

Coast Capital Savings is Canada's second largest credit union with total assets under administration of $11.9 billion, 380,000 members and 50 branches in the Metro Vancouver, Fraser Valley and Vancouver Island regions of British Columbia. Product innovations from Coast Capital Savings include Canada's first free chequing account from a full-service financial institution and the first business account in the country to offer unlimited transactions for a flat fee. The credit union is one of Canada's 50 Best Managed Companies and is designated a Caring Company by Imagine Canada. To learn more, visit www.coastcapitalsavings.com.

(i)Source: Manitoba Agriculture, Food and Rural Initiatives

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