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Are your children getting in the way of a comfortable retirement?

‘There’s social pressure on parents to put kids in so many activities, spending as much as $15,000 a year per child, but your retirement plan has to come first,’ says Brian Himmelman, president of Himmelman & Associates Financial Advisors Inc. in Halifax.

Jeff Vinnick/The Globe and Mail

Having children is expensive. It costs $233,610 (U.S.) to raise a child born in 2015 to their 18th birthday – with the biggest bite for housing and food, according to the U.S. Department of Agriculture.

While Canada doesn't officially tally what it costs to raise a child, extrapolating from the U.S. numbers means it would take roughly $295,500 in Canadian dollars to raise a child to 18 – and that doesn't take into account the cost of postsecondary education.

Given the dire predictions that we're not saving enough for retirement – a recent HSBC report says 48 per cent of working-age Canadians haven't even started – one wonders how parents can begin to save and invest for their own future, while buying the bigger house, second car and all the other stuff that goes with children.

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When you're cradling your newborn, saving for retirement is likely the last thing on your mind, but that's precisely when you need to start, says Brian Himmelman, president of Himmelman & Associates Financial Advisors Inc. in Halifax.

While some people have private-sector or government jobs where retirement savings are organized for them, Mr. Himmelman is seeing more self-employed people or those whose work plan doesn't provide enough. It becomes essential for them to build a retirement plan on their own.

"The biggest problem parents face is that they don't know the number, how much they need to save," Mr. Himmelman says. "Often they don't have a structured or written financial plan.

"Parents have a lot of balls in the air, such as a mortgage, credit cards, childcare and then their retirement. There's social pressure on parents to put kids in so many activities, spending as much as $15,000 a year per child, but your retirement plan has to come first. You need to set up a discipline and a specific amount of money that goes into it regularly."

Mr. Himmelman observes that, while there are a lot of digital banking products available, there's very little planning to go with them. He warns that without a plan, the 25 to 35 years it takes to build a retirement can disappear, through procrastination or because people are dealing with one crisis after another so they're always playing catch up.

"There's a behavioural psychology to money, to investing, to discipline," Mr. Himmelman says. "Not everyone needs coaching, but the majority do need that check-in with a professional to affirm that what they're doing is correct.

"Your retirement plan shouldn't just be on a new app that took five seconds to download. As much as you can go to Google, it can just create more confusion and complications for people. It doesn't take long going down the wrong road to set you back years."

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A retirement plan will show what percentage of income must be saved and what duration of time is needed to hit a specific goal, explains Mr. Himmelman.

Once a plan is in place, parents shouldn't feel guilty about saving for their own future first.

"Everybody always wants to say, 'Oh my kids come first,' " says Mr. Himmelman. "But if you were on a plane, they'd say be sure you put your [oxygen] mask on first. You're no good to your kids if you're up to your ears in debt by the time they reach university age. You've got to look after yourself first, so you can help them later."

Cherise Berman, principal at Bespoke Financial Consulting Inc., a fee-only planning firm in Toronto, points out that it can be cheaper per child once you have more than one. Parents will also find their spending shifts with new responsibilities.

"Once you start a family, you're going to have competing goals for your money, so it really becomes a balancing act," Ms. Berman says. "Keep an eye on retirement and start planning, even if you're young and can't allocate much at that stage. Keep contributing to it."

Her advice is to take stock of all the resources you have available – your income, plus the Canada Child Benefit – then decide how much to allocate to each goal. It's important to focus on all goals, and not just the immediate ones. Don't leave retirement goals for later. She suggests using pre-authorized contributions to put the act of saving on autopilot. Then you can set it and forget it.

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"We see a lot of parents who are providing everything for their children through the various stages and potentially jeopardizing their own retirement," says Ms. Berman. "It really is about finding that right balance."

Saving opportunities along the way include using RESPs to save for your child's postsecondary education. Not only are contributions tax deferred, explains Ms. Berman, but you also receive government grants for up to 20 per cent of your contributions up to $500.

"Always take the free money," Ms. Berman advises. "That goes for your retirement savings, too. Plus, if your employer offers a retirement or savings plan where they contribute or will match your contributions, take advantage of it. Don't leave those dollars on the table."

Another key is to adjust your own discretionary spending – limit vacations and dining out during crunch times when there are extra expenses for children. And set limits for the children, too.

"Parents need to have a conversation with children about their expectations so they understand how and to what extent you can support them," says Ms. Berman. "Don't necessarily provide everything. I see a lot of parents covering all the costs for their children – education, cellphones, car insurance. Because of that, they may not be saving enough for retirement. Kids need to know there are limits to what parents can provide and that parents have their own savings goals. Older kids should have some skin in the game, too, whether it's contributing to their education or household expenses."

She suggests that teens can start earning through summer employment or part-time work if they can, as well as applying to the hundreds of scholarships available, starting with ScholarshipsCanada.com. Parents can set goals with the children, help them to find ways to contribute and to develop a plan to get there.

"Teach the kids to budget, too," says Ms. Berman. "Sometimes we encourage parents to include their children in reviewing the parents' target plan so they see what the expenses really are. It's good parenting as well."

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