As any new parent will tell you, the arrival of a first, or subsequent, baby changes everything. In much the same way they turn your lifestyle upside down, the arrival of children will also disrupt your previous long and short-term financial goals, says Tina Tehranchian, a certified financial planner with Assante Capital Management Ltd. in Richmond Hill, Ont. "You need to revise your entire financial plan. You throw the old one out and sit down at the drawing board."
Here are Ms. Tehranchian's tips on how to calculate the immediate and longer-term cost of children:
1 Build up your short-term savings: The first thing you should do when you find out that you are going to have a baby is to beef up your emergency funds. Figure out how long of a maternity leave you wish to take. Unless you can live comfortably on one income, you need to rein in your expenses, revisit your budget and see where you can cut costs. Also, try and save as much as possible in a liquid high-interest savings account that you can access when you start your maternity/paternity leave.
2 Revise your goals and update your financial plan: The arrival of a baby, especially your first child, is a complete game-changer. This is a great time to review your life goals and to update your financial plan, taking your new lifestyle and revised goals into account. If your goal was to retire at 55 or renovate your kitchen, perhaps the arrival of child means you will funnel the money to cover day-to-day costs and instead delay retirement or choose to make do with your current kitchen for a few more years.
