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The Stepec family - Peter, Kathleen and their four-year-old son Andrew - enjoy a quiet Sunday at home in Guelph, Ont.

Glenn Lowson/The Globe and Mail

Each weekday morning, Kathleen and Peter Stepec rise before dawn and bundle their four-year-old son, Andrew, into the car. Then they drive 40 minutes from their home in Guelph, Ont., to Georgetown, Ont., to drop him at daycare by 6:45 a.m. before hopping on the commuter train into Toronto for work.

It’s an exhausting schedule, but the long commute isn’t their only stress. The Stepecs pay $255 a week for a full-time spot at the daycare centre and that expense has made it difficult to save for retirement or afford any extras they used to take for granted.

“It’s terrible, but I haven’t had my hair cut literally since June,” Ms. Stepec says. “When you’re spending this much on daycare, you just have to put other priorities aside.”

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Their financial situation reflects what many Canadian families experience when children are young and require paid care so parents can work. While previous generations may have depended on grandparents and other older family members for free babysitting, today’s baby boomers are often still working themselves or live too far away to be much help.

To compensate, young families end up shelling out, on average, nearly one-quarter of their income on child care, according to a 2016 study from the Organization for Economic Co-operation and Development.

A recent 2019 Canadian Centre for Policy Alternative report calls Canada’s child-care fees “astronomical.” Cities in and around the Greater Toronto Area and Metro Vancouver have the highest fees for infants. In 2018, parents in Toronto spent an average of $1,685 a month or $20,220 a year for young babies, and shelled out a median fee of $1,150 a month for preschool spots. Cities such as Brampton, Ont., Mississauga, London, Ont., Kitchener, Ont., Ottawa, Calgary and Vancouver weren’t much cheaper.

By way of comparison, the price for daycare is meeting (or approaching) the cost of rental housing in many cities. No wonder these years are considered the most expensive of many families’ lives.

But luckily, they don’t last. When children grow up past the toddler and preschool years, parents start to find themselves with more cash flow. That’s exactly the scenario Ms. Stepec is anticipating when Andrew starts junior kindergarten in the fall this year. Even though she’ll still have to pay for before- and after-school care, the family will suddenly be $500 a month richer.

“We’re already counting down the days,” Ms. Stepec says, explaining that it has been impossible to build any long-term savings since her son was born, except for a tax-free savings account into which she deposits $60 a month, considering it more of a rainy-day fund than long-term investing. She has a plan for the coming windfall after daycare, though, and is using a financial spreadsheet to decide how best to use it eventually. The goal come September? Pay down consumer debt and use any extra money to pay off the mortgage faster.

“I love her! I don’t even know her and I love her,” exclaims Judith Cane, a money coach in Ottawa, when she hears how proactive Ms. Stepec is being in anticipation of the family’s coming transition from broke to flush.

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According to Ms. Cane, the family is doing everything right: planning for the cash-flow uptick at least six months in advance, setting up payments so they’re automatically deposited each month and earmarking the money for what will help the family financially long term.

“Rather than waiting until daycare is over and saying, ‘Phew!’ have a plan so you don’t get into the habit of frittering it away,” advises Ms. Cane, who says she’s seen families dig themselves into even deeper debt by buying a new car when daycare costs went away, even though they didn’t really need the new wheels.

Without a well-thought-out plan, it becomes too easy to replace one debt with another.

Andrew Stepec, four, will start junior kindergarten in the fall this year. Even though his parents will still have to pay for before- and after-school care, the Guelph, Ont., family will suddenly be $500 a month richer without daycare costs.

Glenn Lowson/The Globe and Mail

Instead, consider at least four different areas of focus: consumer debt, registered education savings plans (RESPs), retirement savings and emergency funds, she advises. Not only is building a registered retirement savings plan portfolio a good idea now, but so is taking advantage of any employer pension matching programs. “It’s a guaranteed return on investment,” she says. “No advisor can guarantee that return.”

Taking those monthly savings and using them to create an emergency slush fund is especially important for growing families who might have a difficult time coming up with the money to pay for snow tires, a new roof or a furnace easily while a parent is, say, working part-time while kids are still young.

It’s important to remember that child-care costs tend to go down gradually too, so planning is a continuing process. Infant care usually costs more than paying for someone to watch your toddler or preschooler. In other words, it’s rare that a family goes from paying $20,000 a year to nothing.

To take full advantage of the situation, Ms. Cane says it’s also not a bad idea to create a children’s “activity fund” each time a daycare price drop results in more money in your pocket. Even if a toddler isn’t in gymnastics, skiing, rock climbing or taking piano classes yet, eventually they will be. It’s best to be prepared for the expense and start saving early, even if it’s just $50 a month for a few years.

“It’s crazy. I had one client, a couple, that were spending $30,000 a year for two kids. Instead of spending $1,600 on daycare a month, they’re now spending that on kids’ activities, equipment, tournaments and travelling,” she says.

Janea Dieno, a certified financial planner with Raintree Financial Solutions in Saskatoon, who works with families and is a parent to small children herself, knows all about how much children’s activity expenses can take a bite out of the post-daycare budget. Her son is 6 and when he recently started hockey, she shelled out $1,600 on equipment and lessons.

“I call September, ‘Chequetember,’ ” she explains, referring to the month when payment for many clubs, teams and lessons comes due. “I thought I was going to save all this money, too, but now I shelled it all out on hockey.”

Ms. Dieno also agrees parents would be wise to start saving up for activities in advance, but she’s also a big proponent of using some of the funds to create a retirement portfolio, particularly if that was put on the back burner during the expensive child-care years. She would recommend paying off consumer debt and saving for retirement before throwing more money at the home, at least while mortgage rates are still comparatively low.

“If my mortgage is paid off, but I can’t retire because I have no savings, what’s the point of paying off the mortgage a couple of years sooner?” she asks.

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