As longtime Sonnet customers, my husband Kevin and I have purchased and updated insurance around our major life milestones like renting a condo together, purchasing our first condo, moving, and buying a new car. Now we’re expecting our first child, and it’s our biggest milestone yet. As the co-founders of online will platform Willful, a Sonnet Connect partner, we spend a lot of time thinking about being prepared. As we navigate becoming first-time parents, we’ve compiled a list of the financial tasks we’ll be checking off our list when the new baby arrives. If you’re expanding your family, hopefully this helps save you some time (and money!) along the way.
1. Update or purchase life insurance
If you’re married, or you own a large asset like a home, you may already have life insurance. Kevin and I purchased a policy when we bought our first condo. so if anything happened to one of us the other would be able to pay off the mortgage. Having a child is a very common reason to take out a life insurance policy, since you now have someone who is financially dependent on you, and you want to ensure that they are taken care of if anything happens. You can either purchase term or whole life insurance, and you can do that online via a platform like PolicyMe, or via a life insurance broker. If you already have life insurance, ensure that you add your child as a beneficiary or backup beneficiary on the policy (for example Kevin is my beneficiary, and our child will be our backup in case something happens to both of us).
You may also have life insurance through your employer, so it’s important to review your benefits package. You can add your child as a dependent on your benefits, and add your child as a beneficiary on any employer life insurance policies.
2. Update or create a will
This is high on our list, but not just because we run an estate planning company. Like life insurance, a will isn’t designed to help you – rather, it helps the people who leave behind: spouses, children, and other family members. Over two-thirds of Willful customers are parents, and that’s because it’s even more important to have a will as a parent. This is for 3 key reasons:
· A will guides you through appointing a guardian for minor children. This is the person or couple who would care for your children if you and the other parent were to pass away. This isn’t fun to think about, but it’s extremely important. If you pass away without a will the courts will appoint a guardian, and it likely wouldn’t be the person you would have chosen. Here are some tips for how to choose a guardian to help you make this important decision.
· A will allows you to add your children as beneficiaries of your estate – it’s common to leave everything to a spouse if they were to pass away; and then to add children as backups in case both parents pass at the same time. You can appoint whomever you’d like as a beneficiary – you can even appoint charities! Just note that family law says you are required to support a spouse and children who rely on your financially.
· A will allows you to decide when your children receive their inheritance. If you pass away without a will, minor children would receive their full inheritance at the age of majority (18 in Ontario), and many parents want to delay that until they’re older and may be more responsible. If you did pass away when your child was a minor, their inheritance would be held in trust until the age you chose in the will. The funds would be managed by a trustee who would be able to release funds to the child’s guardian for their ongoing care.
Make sure to keep your will up to date as life changes, for example as you have more children, move provinces, or get married/divorced. You can make updates for free anytime if you create your will online with Willful, and Sonnet Connect readers get $10 off any plan with code SONNET10. Click here to get started.
3. Review your budget and plan for emergencies
Kids are expensive! This is something I’ve seen firsthand as we’ve designed our nursery (check out secondhand marketplaces LittleTraders and Rebelstork to save on baby goods). One of your to-dos when baby arrives is to apply for the Canada Child Benefit, a monthly payment from the government that helps offset the cost of raising children.
One thing Kevin and I have focused on is redoing our monthly budget to include one-time costs (like nursery furniture), as well as ongoing costs like diapers, formula, education savings, and clothes. While we can’t plan for every cost, and we won’t know how much we’ll receive from the Canada Child Benefit until we apply since it’s based on a variety of factors like household income and location, we can at least start to budget and update as we go.
We’ve also started building an emergency fund to deal with unexpected costs. We use an app called Moka, another Sonnet Connect partner, which rounds up your purchases in your bank account and invests the difference. It’s an easy way to build an emergency fund through automated savings, and it gives me peace of mind that we’ll be able to deal with any curveballs.
4. Open an RESP
When I was 23, I tried to open an RESP (Registered Education Savings Plan) with my bank. I learned about how this government program allows you to save up to $50,000 for your child’s education, and the government will match up to $7,200. Unfortunately I was informed that you have to have a child in order to open an RESP, so 13 years later the time has finally come! An RESP is great for a few reasons: first, free money from the government! Second, any interest or gains made in the account are tax-free. Finally, it’s a way to force yourself to save early for your child’s education, since 18 years will fly by, and post-secondary schooling is expensive. You can open an RESP via online platforms like Sonnet Connect partner Wealthsimple, or via any financial institution.
There you have it! Those are the four main tasks we’ll be checking off our list when baby arrives. There are some smaller to-dos you should also be aware of, including applying for a birth certificate, applying for a SIN number (you’ll need this in order to open an RESP), and updating the beneficiaries on any registered savings accounts like an RRSP. Hopefully this helps relieve some stress as you embark on your journey as new parents – I know we’ll be more prepared by following these steps.
Erin Bury is the co-founder and CEO at Willful, an online will platform that helps Canadians create a will and power of attorney documents in less than 20 minutes. Since launching in 2017, Willful has helped tens of thousands of Canadians create their estate plans.
Sonnet and Willful have a commercial marketing partnership.