Toronto Star

Millennial Money: Can she afford to raise a kid in Toronto?

Orignally published on 2022-01-04 13:42:00 by www.thestar.com

Millennial Money is a weekly submission-based series that provides financial advice to millennials. Read the full series here.

For a decade, Beatrice has been working 60-hour weeks as a prop design manager at an agency. Making $80,000 a year on paper, she brings in close to $100,000 with overtime factored in.

“Working in the film industry… it has its own hours and schedules. It’s just the way it is and I’m used to it,” she said.

But she’s experiencing a big change in her life this year — she’s expecting a child in a few months. “My goal is to financially and mentally prepare to bring a child into the world in a place that is so expensive!” Beatrice said.

Currently, she’s still working long hours on set, but she expects to slow down and go on maternity leave. She lives with her partner in a two-bedroom unit in Bloordale, which they rent together. Beatrice pays the majority of the rent.

“My partner works odd jobs, so I am a sole provider,” she said, adding that her partner also has $5,000 in debt they hope to pay off by 2022, with her help.

Thankfully, because of the nature of her industry, she gets access to free PPE and easy ways to test for COVID-19. On set, they are also given catered food, which helps cut costs for someone always on the go. When Beatrice has time off, she likes to spend it at home or hang out with friends, once a week.

From housing to child care, Beatrice is just hoping to get more clarity. “Do we stay in Toronto? Can we stay in Toronto? What costs should I be aware of? Also are things costing more because of the pandemic? Just a little worried,” she said.

To get an idea of her day-to-day finances, we asked her to share a week of her spending.

The expert: Jason Heath, managing director at Objective Financial Partners Inc., on Beatrice’s future.

Congratulations to Beatrice and her partner on their growing family. I hear their concerns about raising a child in Toronto. Certain costs, like child care, may be more expensive in Toronto than other parts of the country. But local housing costs may be a bigger issue for them in the long run. The other costs for babies and children are comparable in different cities across the country.

The Canadian Centre for Policy Alternatives produced a list of median child-care fees for toddlers across Canada as part of the 2021 federal budget. Fees in Quebec were $181 per month at the low end, compared to $1,578 on average in Toronto. Toronto is a lot more expensive than some places, however; fees in many other Ontario cities ranged from $1,200 to $1,300 per month. The extra couple hundred dollars per month in Toronto compared to elsewhere in the province may add up in the short term but will be reduced to before- and after-school fees or possibly no fees the year their child turns 4 and starts junior kindergarten.

Beatrice is lucky to have such modest rent at $1,100 per month. However, if for some reason she and her partner had to move for reasons relating to their landlord or other factors, market rent could take a big bite out of their budget. Their monthly costs could double, but not just for a few years — permanently. I see this as a major risk for them and something to factor into their budgeting. Or something to consider getting ahead of as they decide where they want to raise their child.

I know there are benefits to having a little one in daycare beyond the ability to work while they are there. However, if Beatrice’s partner is working odd jobs and she is the breadwinner, they may want to consider part-time daycare or help from family, with her partner as the primary caregiver.

I would not be worried about retirement saving right now. Paying down her partner’s debt and building up some savings over the next few months should be their main priority. If they largely rely on her current $80,000 income and $6,000 monthly take-home pay with overtime, they are in for a pay cut during whatever time she takes off after the baby is born. Employment insurance (EI), maternity and parental benefits are a maximum of $638 per week in 2022 or about $2,552 every four weeks before tax. Beatrice mentions she will be paid for maternity leave, so it could be that she has a top-up from her employer while she is off work. She may find the top-up does not replace her whole salary, especially given that the overtime she works may not be considered in the top-up even if it replaces her whole base salary.

Beatrice and her partner should apply for the Canada Child Benefit. She can use the federal government’s Automated Benefits Application on the birth registration form when they register their newborn with the province. This allows parents to apply for the Canada Child Benefit, the GST/HST credit, and related provincial or territorial programs. Assuming her partner’s income is $20,000 per year, I would estimate their Canada Child Benefit at about $135 per month.

There are things like life insurance, wills and education saving that should be included as part of Beatrice and her partner’s financial planning. They should consider insurance needs and estate planning in the coming months.

Results: She spent more. Spending in week 1: $270.98. Spending in week 2: $324.

How she thinks she did: “I spent a bit more this week, but it was on things I needed, specifically maternity clothes,” Beatrice said. “I’ve been getting bigger rapidly so the need for new clothes is essential.”

She adds that because it’s winter, she’s also layering up to stay warm and cosy, which is essential during pregnancies. “It’s been very dark, outside and also with COVID-19. Doing a bit more to treat myself.”

Take-aways: After receiving the advice, Beatrice admits that preparing to start a family in Toronto, as a renter, is quite daunting.

“The adviser is right. We’ve had several negotiations with our landlords and we know we have a good deal,” she said.

Because of expensive housing, compounded by child care costs in Ontario, Beatrice is now considering relocating, if possible, and staying part time at her family and friends’ places when she’s on set, when it’s safe.

“My friends and family own their spots, so it’s just more secure,” she said. “That way we could move out a bit farther, and, if I need to go on set downtown, I can make a little trip when I get back to work.”

In terms of her pregnancy and bringing a child into the world, she wants that to be a priority. She will be applying to the Canada Child Benefit as suggested by Heath and will look into how they can minimize child-care and daycare spending.

“My partner and I are going to have a serious discussion about who can stay home, if it saves us more, and how that will look in our near future,” she said.

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Orignally published on 2022-01-04 13:42:00 by www.thestar.com

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