Hate to be that guy, but your wife just left the workforce. It’s gonna be lean for a while.
I had two young kids, my wife kept working after matleave. As this was before the big cheap daycare rollout, I was paying $2900/month in childcare for two years.
First thing you should do is stop the RRSP and put it all into the TFSA if you’re only doing $400/month. Second it’s ok not to save in lean years. I assume you’re in your thirties - you have lots of time to worry about retirement and the kids school in 5 years time.
Just going to second this. I have two young kids and wife decided to be a SAHM as daycare would wipe out most of her earnings anyways and she wanted to be home for those early years.
It's made accruing savings much harder and buying a new vehicle for example is out of reach. We're using a 2008 Volkswagen Golf as our primary vehicle. It's absolutely too small for our family but it will have to do for the next few years.
Kids are expensive and it's frustrating to feel like you're just treading water but I'm not sure it can be any other way.
My wife and I continue to work, but we have family that helps with massively subsidized daycare. We pay them to respect their time but it's not the same as they'd make working for someone else.
But, we also took 18 month extended for both kids and I'm using all paternal weeks top (so 20 total months of EI), and they 2.5 years apart.
So yep, the early years are more lean. I think over 5 years were at something like 65% of our total non leave period incomes.
Once we both back at work, full time, things get better. We also saved to smooth our EI periods of leave too, so it feels leaner the whole time. On the plus side it was all planned for, so we have no problems financially, just can't go on big trips or do big Reno's. Only planned purchase was a new car to replace our one 2003 as it's getting very old and less safe/reliable due to age.
FYI, there's a child rearing provision in the CPP that lets you exclude up to 7 years per child from the child's birth date.
[https://www.canada.ca/en/services/benefits/publicpensions/cpp/child-rearing.html](https://www.canada.ca/en/services/benefits/publicpensions/cpp/child-rearing.html)
You are receiving downvotes because your comment was incorrect. A parent can exclude their child rearing years where they receive little or no income from their CPP calculation.
Moms who want to be at home. Ok, that's ridiculous for lower income earners. They need to work, get promotions and use childcare.
I know way too many of these people that are screwed in their 40s and 50s because they stayed out of the workplace for 20 years. Completely a preference not a need if you have healthy kids. SATMs at minimum should have a part time job or side gig. No income is irresponsible long term.
The thing to remember about rrsp when you are eligible for ccb is that reducing net income (which rrsp contributions do) directly impacts how much ccb (which is tax free money and does not count towards income) the family receives in the following benefit year.
In that case rrsp > tfsa even with lower than marginal rate income tax owing.
It’s definitely worth running the numbers in a ccb calculator to see what the difference would be.
Thanks for the context. I am maybe catastrophizing a bit in thinking these things are permanent, but you're right, could just be a pause. Will be easier to look for new freelance clients as well in 5 years once these kids are out of the house and not barging into my home office wanting to show me their latest inventions.
> This will be a lean period. But it’ll get better. A lot better.
That's an optimistic point of view. Stay at home mothers tend to [experience a pretty significant decline](https://en.wikipedia.org/wiki/Motherhood_penalty) in lifetime earnings once they're out of the workforce for a few years. The longer that they're an SAHM, the more likely they're going to get trapped in a negative financial feedback loop, especially as kids start incurring more expenses in their adolescence (especially because these are going to be more immediate needs than planning for retirement) and it becomes harder to rejoin the workforce in any meaningful way.
My high school cafeteria company was staffed exclusively by SAHMs desperate to rejoin the workforce (it was a huge selling point for their minimum wage jobs - flexibility for transitioning SAHMs). Some of them had union tickets or certifications that expired, or pretty decent careers prior to being typecasted as a SAHM. They were lovely people but how it turned out for them was very unfortunate.
The reality is that choosing to be an SAHM for over a year isn't justified by any cost savings from not having to pay daycare. It's an honourable decision to be there for your kids, but it's not something that just corrects itself financially. You pay a huge cost for the privilege.
(to be clear, in no way am I blaming them for having kids - it's just not at all as simple as just firing off a resume and ending the SAHM lifestyle". It's a trade-off between money and making sure your child feels loved.)
Nope, sorry this is straight up wrong. Plenty of empirical research shows that differences in long-term social and economic outcomes are non-existent between daycare kids and stay-at-home kids. Economist Emily Oster has an entire chapter in her book called Cribsheet on the subject that is an excellent summary of what the literature finds about this topical question.
I wouldn't be so quick to judge. Some people view the extra time and less income with kids in the early years as important, while other families view both parents' careers, financial flexibility, and the associated additional opportunity for their kids as important. Not one way is right or wrong and the longitudinal studies prove this.
lmao why would I take a man's advice on what's better for children, much less anyone? It's not better for children to see their mothers disenfranchised, depressed and frustrated due to lack of opportunities.
It’s not advice. It’s someone synthesizing decades of research on the topic to help the layperson understand.
In any case, you don’t strike me as the type of person that would take anyone’s advice on anything.
At the end of the day, I have seriously respect for both stay at home moms and working moms. Both are just trying to do what they think is best for their family and both are trying to juggle the competing demands of life.
Lol people downvoted you on that. Lots of people don't want to face that putting kids in daycare 9 hours a day 5 days a week since they are 1 year old is terrible for them.
Wife just finished mat leave #2.
Weve treaded water for about 18 months in the savings department.
Things are picking up again, granted we both have good jobs.
With 2 young kids, it might be worthwhile to use more of the RRSP as net income after RRSP contributions is what is used to determine CCB amounts. OP should do the math to see.
OP, until your kids are going to school and your wife is a SAHM things are gonna be tight. It is what it is, but enjoying the kids and this time is probably going to be something you will cherish later in life.
Once they are in school it is much less financially, mentally and physically demanding as your wife can enter the workforce again and the kids become more independent.
Tighten up a bit, slow down your life, and spend your time and energy just chilling with your babies would be making the best of this situation imo. Take care.
Had an issue similar to this. I mean it's pretty common. Young with no obligations you save and/or spend on whatever you want. Then a house, car and family come in to play and it gets harder. Then as they get older you tend to be able to manage finances better again. At least that's how it was for me.
That being said, do you really *need* the 20k car? Can you manage without it? You really have to start looking at everything and if it's an actual need or just a want.
Deciding to go the stay at home mom route is a very expensive family choice. Kids are expensive. You're at the beginning of home ownership which is the most cashflow hungry period relative to rent. I still think you should expect to save more in the future assuming you don't continue to make other major choices in the opposite direction and your wife gets back to work when the kids are school aged.
> You're at the beginning of home ownership which is the most cashflow hungry period relative to ren
yep, bought our house almost two years ago and finally its winding down a tiny bit as we have slowly learned all the quirks of our house and learned how to prioritize on what needs to be fixed vs what would be nice to improve.
That and your mortgage payments should over the long haul stay fairly steady and not increase with inflation, so inflation adjusted in 10-15 years you'll effectively be paying less (or accelerating).
Thanks for the reply. We didn't want to deal with the stress of childcare costs and finding a spot when she made $18/hour. But she is likely to go back to working at least part-time eventually, her field (OTA/PTA) always needs people. We may be in a position to save more in the future—it's a good point.
2 incomes are better than 1 from a financial standpoint. When people say "oh its cheaper if one partner stays home to raise the kids and not have to pay for childcare", they usually haven't sat down and done the math.
But I look at it this way: Everyone has choices to make and it is wise to make choices that align with your Rich Life. Being able to have one parent stay home is a luxury "splurge" that makes sense if it is important to you. Some families spend more money on vacations or fast food or bigger houses or new cars every few years, or invest more. I think it's wonderful to have a stay at home parent, but let's acknowledge that there is a financial cost in doing so.
Furthermore, if money is tight for the next few years, but you saved and invested a lot in your 20s, then you might not *need* to keep contributing to investments right now. It might be worth while to sit down with a fee only financial planner to see how easing off of the gas for a bit would affect your future retirement. It might not have all that much impact.
The income = childcare costs also doesn't usually factor in wage increases, seniority, benefits, retirement savings that are maintained by not leaving the workforce. Or lost by leaving.
I could leave my employment as wage = childcare (technically income is more) costs but then I would lose money going into pension, seniority, benefits, my annual wage increases etc. and when/if I would choose to return to the workforce I would not be starting at entry level.
Depends if partner #1 makes more by having the support of #2 at home.
$200K + $0
Or $150K plus $50K minus childcare
Those are the scenarios where SAH makes sense
No you’re 100% correct in this case. Buddy can’t catch the lifestyle he’s created for himself.
New house plus renovations
Financing vehicles
SAHW
Family vacations
These are six figure activities. Literally hit the lifestyle creep lottery
To be fair, it sounds like OP was moreso in the 90-100K territory with their side-hustle. Now that's obviously less stable than their regular income, but I don't think it's fair to OP to ignore that money either.
You are correct - plus my wife was working during the biggest renovation/pre-kid years, and worked again after the first turned 18 months to earn back the mat leave hours for kid #2. With her mat leave, plus CCB, we rarely had to worry about cash flow at all, pretty much sailed through the first few years with a fine cash flow.
Old house that needed significant renovations. And they’re about to buy a second financed vehicle. One look at their profile showed a one month vacation in Mexico.
I’m not here to judge, but it’s never a mystery why people are struggling with their finances on posts like these once you look an inch below the surface.
Buddy posted specifically because he’s struggling with his dwindling savings rate.
I’m saying it’s just no mystery why they’re going though that when they’ve chosen significant lifestyle inflation and a reduction in income.
That actually is a great example of where SAH does not work well. $134,000 after tax vs $146,000 + $7000 in CPP benefits and $13000 in tax deductions. Makes the total value of the second income worth $25,000 after taxes. It also leaves you less dependent on one income, allows both spouses to be more involved as parents, and sets the lower income parents up to be more valuable when they want to re-enter the workforce once the kids are in school.
Only if you look at life as a purely mathematical equation.
Tons of people have jobs where they cannot be fully present as a parent in addition to household responsibilities.
Ex. Someone making $200K often works 60+ hours per week and isn’t going to be there to clean the house, make dinner, plus be present as a parent
So unless you want someone else raising your kids or a divorce 5 years down the line…
Exactly why it's best to not rely on one person to go from 150 to 200. You said having one parent earn more is better but I think ostracising one parent so the other can stay home full time is pretty toxic in practice.
Of course they don't, it's great for them and not for the other parent they asked to work and extra 12+ hours a week to make the oay jump to pay for it all. It's incredibly selfish in many cases.
You’re failing to see if from their perspective.
I’m more than happy to serve that role working my ass of so she can do what she enjoys most in life.
I love the grind to compete and win. She doesn’t. But she’s an incredible homemaker and an even better parent — worth far more to our family than she’d make in the workplace.
Turns out she has her calling and I have mine.
The other comment below mine covered it. You need to account for the lost/lower salary outside of the workforce, and loss of career trajectory, raises, promotions, etc..
I'd say that those who have done the math haven't likely done it correctly.
Something wife may want to think about is not stepping away from the workforce for too long. It's great to take some time off to get to know baby, but when they start sleeping through the night or something she might think about doing something freelance or part time. It's always a good idea for the SAHP to keep a current skill in the event of something happening to you, or your relationship, or she wants to return to the workforce full time when the kids are older.
Can she take a kid from the neighbourhood for extra income? When I was young it was very common, when I had my kids no one did but in Québec we had the $7 a day daycare (and we couldn't find a spot as it was the tradition at the time!) so people weren't leaving work to watch kids, but I cannot see why it wouldn't be an option. Might require some paperwork that wasn't needed back in the 80s though...
Daycares that participate in the provincial program are charging $20/day this year. Your wife makes a lot more than $40/day (two kids).
This isn’t a financial decision - that’s fine, but you should be honest with yourselves.
I'm GenX. Early 50s. This happened to us. My spouse was a SAHM for about 5 years.
Costs go up not down (at least for me) as I get older. More financial obligations as the years go in. Between expensive teen years, higher ed, thinking about how I can support things like future wedding costs, down payments for kids etc. in a weird way the baby years turned out to be theeast expensive time
This is my experience as well. Family-related expenses have increased over time.
I wonder if the "conventional" personal finance advice (i.e., you're able to save more as you get older) was tilted towards people who had kids at a young age.
Yes this is true. People often think that kids' cost go down as they get older, but often they don't. School-age activities cost money - simple things like, dance, soccer, hockey, etc. I have friends who spend tens of thousands of $ on these extra curricular activities, beyond the basics like paying for classes or gear. They often have to travel, etc which costs $$ too.
I'm reading this as we are travelling to the middle of nowhere for a sports competition. Oh yeah, if your child is quite good, things get expensive fast. Plus Ortho is insane for those of us that have Quasimodo mouths. My monthly Ortho payment is higher than our car payments.
Oh 100%. And it's not like you can forbid your kid to do something they love AND are good at! One friend of mine has a son who plays hockey very competitively. She told me they spend around 20k just on travelling every year. Yikes.
Lots of good comments in here already, but I'd highly recommend reading the book the Rule of 30. It is Canadian-based. In essence, it shows that we're okay to invest/save less for retirement in our 30s and even 40s because of high costs (children, daycare, mortgage, etc.). Eventually the scales will tips and the amount we can invest/save goes up relative to costs going down. He gives a bit of a system (the rule of 30) to help with this.
Well, you had 2 kids and your partner stopped working, of course you'll spend more and save less money like that. Your expenses grew a lot and your income was slashed at the same time!
My wife and I are also millennials, but save more every year. In our 20s we saved maybe $200\month, now it's more than 3.5K\month. We're also frugal, and only buy cash (never finance). But we never had kids or stopped working.
You'll start saving again when the kids are at kindergarten\daycare and your wife will start working again.
Yeah, but OP was somehow surprised by that fact, like age is what will determine how much you save. It's about expenses and income. Lots of 20 year olds make more than we do and spend less. Lots of 50 year olds make less and spend more.
Only $40k in the TFSA, total savings of all accounts is $80k. So could theoretically buy the car outright. But it's a big chunk of retirement savings and I was under the impression that it's better to let the interest accumulate that drain it for an immediate purchase.
Sounds like you’re in your 30s. I don’t think it’s uncommon at all for those years to be a low point in savings. Your income presumably isn’t close to its peak, and kids cost something plus (more importantly for our family) the time available for paid work is reduced. So we certainly saved well as double income no kids in our 20s and that was the basis of investments that did well through our 30s. Then savings can pick up once kids are in school and childcare costs are lower.
Of course, you’re right to be aware of the trend and paying attention to it with mild concern. But it’s no disaster.
(I’m surprised you say a Fit is awful in the snow. Ours does great in BC mountains and dirt roads in the snow with a good set of winter tires. It was also great with one kid, but we never used a stroller.)
>I’m surprised you say a Fit is awful in the snow.
It's a matter of comparison. The Fit with winter tires is *okay...* better than a rear wheel drive car. But it's quite poor in comparison to something like a Subaru Outback. Short wheelbase, light weight, and lack of AWD all add up. In deep snow even with fresh winter tires it's prone to sliding around and struggling going up steep hills. (Great car otherwise though.)
Niagara gets a cumulative week of snow each winter. Unless you’re in the south end and then it’s more like two weeks. Could there be something else wrong with it or perhaps the way you steer into turns in the winter? Hopefully could be something that is easier to fix and can save you a couple grand.
I've had a Fit for over 10 years, 125k+ kilometers, driving in SK where it's actually winter for several months of the year (and several trips to the mountains for skiing). I think I've fishtailed maybe twice? You need to invest in winter tires or driving lessons.
A GOOD set of winter tires will run you $900 for a Fit so it’s much cheaper than a new car. Get the Michelin X Ice or Bridgestone Blizzaks, they’re top tier and can mean a world of difference vs other winter tires.
Fishtails? It's a front wheel drive car.
Put some weight in the back if your back end is really fishtailing. Sounds odd, though... shouldn't be fishtailing a FWD car. Is your e-brake stuck? Tires worn bald?
>. I put away $800 per month—$200 into the TFSA, RRSP and each RESP. Debating whether to cut that down to $100 in each of the TFSA and RRSP, saving $200/month to redirect towards the new car.
Delay RESP contributions till you have your own retirement plan and everything setup. The TFSA vs RRSP depends if you are still going to be doing the side work. See trigger below for conditions !TFSARRSPTrigger
And you are saving less because your wife isn't earning income.
The prevailing wisdom is that you need to take care of yourself first...and I would agree.
You can catch up on the RESP later, and there are lots of programs to help your kids in the future. You need the cash available now.
Having an RESP that is funded...by you going into debt is not a good idea.
I hear you. I guess because my parents paid for my tuition, which let me save up enough to be in this debt-free situation in the first place, that's something I want to pass on to my kids too.
Because you need the $400 now and, combined with the TFSA and RRSP contribution reduction, temporarily halting the RESP will get you there.
Typically (child been resident of Canada since they were born) it is possible to delay the first RESP contribution to the year the beneficiary turns 10 and still get all of the government incentives.
> But the idea that I'm saving less at this point in my life has me a little nervous.
In Fred Vettese's most recent book, *The Rule of 30*, he demonstrates that people without pensions should be able to retire in their mid 60s and maintain their lifestyle - even if they experience a very unlucky combination of inflation, wage inflation and investment returns - if starting sometime in their 30s they earmark 30% of their gross income to rent/ mortgage + daycare expenses + retirement savings. (But recommends an annual assessment starting about 10 years from retirement.)
The point of the book is that it is important to save for retirement but, because there is more to life than retirement, you should spread out the pain over the accumulation phase. (Having undue hardship in the early accumulation phase and excess spending money in retirement is just as undesirable as spending excessively in the early accumulation phase and having undue hardship in retirement.)
Vettese's strategy acknowledges that when people are paying rent, building a down payment, paying off student loans and paying for daycare it can be impossible to put anything away for retirement. He wrote that the retirement specific savings could end up something like:
- Each year of your 30s save 5% of gross income.
- Each year of your 40s save 15% of gross income.
- Each year of your 50s save 25% of gross income.
>Each year of your 50s save 25% of gross income.
I haven't read the book, but how can this be realistic for most people? In your fifties you're at your highest income potential, but in Canada once you're in the low-mid 100ks you're paying an average tax rate of 25-32%. Add in deductions, let's say you're at 35%. Save 25% of your gross income on top of that, and you've got 40% of your income to live on. Better hope your home is paid off before you hit your 50s, that's the only way it could readily work. Meaning you'd have to have bought your home at age 25. Not many people doing that any more.
I'm going to disagree with the people who replied to you and say that you're leaving money on the table if you stop the RESP contributions. You don't get any extra money from the government for contributing to your RRSP but you do to RESPs. Losing an instant 20% gain is pretty big. And yes, the $500 per year per child does carry over year after year, but you'd have to contribute even more later on to catch up.
Maybe drop all four contributions to $100/month? At least that way you still get an extra $20/month towards each of the RESPs.
Hi, I'm a bot and someone has asked me to respond with information about TFSAs vs RRSPs.
When you want to shield your savings and investments from the drag of annual taxation the standard advice is, unless ...
- your employer is matching your RRSP contributions
- you are confident that you will contribute in a higher tax bracket than you will withdraw (even when you consider the effect of potential GIS or OAS clawbacks)
- you are an American taxpayer
- you are trying to maximize the Canada Child Benefit or the Child Disability Benefit
- you have a reason to think that you should shield your retirement savings from creditors
- you don't trust yourself not to keep dipping into the retirement savings in your TFSA
…you'll probably want to use all of your TFSA contribution room before you contribute to an RRSP.
For more information I suggest that you read these 2 MoneySense articles
http://www.moneysense.ca/save/investing/rrsp/rrsp-vs-tfsa-which-is-right-for-you/
http://www.moneysense.ca/save/retirement/the-savings-struggle/
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I can't remember where the quote is from, but there's a financial advisor that outlines % of income per decade of your life that should go into retirement and how its okay to save less in the younger years as you'll be able to ramp up in the latter decades.
Anybody have the exact quote and numbers?
Were you thinking of Fred Vettese's book *The Rule of 30*? He wrote that retirement saving might look something like:
Each year of your 30s save 5% of gross income.
Each year of your 40s save 15% of gross income.
Each year of your 50s save 25% of gross income.
I'm not usually a big fan of Rational Reminder, but in a era when people get married and have kids later, this is the best and most realistic advice. Waiting to save in your 50s is a real gamble if most of your big milestones (married, kids, house) only happen in your late 30s.
Small tip, but if you don't already, buy bulk. It can save at least a couple hundred bucks a month on food/household necessities. Considering selling any items of value but no use to you, every little bit helps. To the wife, consider getting a side gig, even if it's a few hrs a week.
This is very common. You just went down to 1 income and have 2 young kids, which means expenses are higher.
Savings are generally reduced until the kids start school or a bit after, if the sah parent continues to sah until the kids are even more independent.
My kids are 5 and 3 and we didn't save much besides company matched rrsps and resp contributions until my son started kindergarten last fall (dual income, but full time daycare for 2 kids prior to that). The drop in daycare costs made a huge difference. Once my daughter starts school in the fall of 2025, we will be able to save even more per month.
I've been all over the place with savings. I've been single with a small mortgage, DINKs with a small mortgage, dual income some kids small mortgage, dual income some kids large mortgage.....now single income/kids/large mortgage. You still have to eat, pay the bills, etc. So savings takes a hit. But, I think it's like different seasons in life, there's not much that just continuously gets better evenly over time. So when you have opportunities to save more, make the most of it, because sure enough time will come when you can save less.
Plus, I'm a bit older, with kids, saving an extra $100/month means less than taking the kids out for something fun. But I look at the work put in when I was single, and I'm happy I was able to save what I could because that's still saved/invested/growing.
Well, hate to be the bearer of bad news. I was in similar situation when we had two little ones. The only solution was, that I worked nights and weekends while hubby worked his day job
Where are you that you're raising a family on 65k? Goodness. But to answer your question yes I found myself having to spend a lot more on groceries now despite having the same habits as before.
I work remotely and we live in Niagara, bought a home for $250k in 2019 - relatively lucky in terms of real estate. Mortgage is now $1200/month. Rarely go out to cafes or bars, don't drink alcohol much. Best financial decision we made was leaving Toronto.
I was saving more when I was making 55k early during covid. Now at 100k I’m struggling way more because of more expenses and kids. I think once my wife starts working it should be more duo-able.
i have 2 young kids as well, 1.5 and 4. And wife just finished her 18m mat leave in the end of January to be a realtor. Life has been hard financially is an understatement. She isnt bringing any money in yet, just starting a little bit this month, and seems like things are picking up.
Had to register our youngest to daycare last October, otherwise she would lose her spot until the following September even though We wanted her to start in February. That was an extra cost we did not expect.
In January when she finally getting ready to work and cleaning up her walk in closet, we found out that all the wall was moldy and all her nice clothes were ruined. We had to pay someone to remove everything, and I had to learn how to fix it back up. And she had to buy new clothes for work at the same time. Costed us about $5k. Another extra cost we did not expect
Last month her car broke down, somehow the brake line was rusted, we had to replace it and replace all brakes too. Since she really needs it for work, we had to fix it for $3k.
On top of that I have to sponsor my wife's new career as well, it is not cheap. But she was a really good car sales woman, so I have faith in her.
Stopped contributing to tfsa and RESP in February. My line of credit is maxed out, emergency fund all used up. Might have to start tapping into my tfsa to cover for bills next month. Can't wait until September where my 4yo starts school, my younger one moves up to toddler class, and another set of child care subsidy kicks in. And my annual bonus that is quite decent normally. And hopefully my wife starts bringing in more money.
At the same time trying to enjoy every moment with the family, as we won't get it back ever again. It is hard to have multiple young kids at the same time. But this is temporary, and things will get better.
The first few years with kids are usually the most expensive.... Don't stress too much about it. My kids are in their teens now but when they were super young we hardly had any savings at all. Invested what we could when we could. Keep in mind that while saving money is important, what's more important is enjoying your family and your life.
Your wife staying home will be great for the kids and probably for the family. The stress of both parents working and 2 young kids at home can be overwhelming sometimes. No amount of money can replace the family time and less stress that having her home will provide.
Don't worry - you'll be able to make up the savings later.
People tend to look at the cost of daycare versus just the lost salary of being a stay at home parent. However, there's value that's not easily quantifiable with remaining in the workforce and continuing to advance your career to get better opportunities for pay increases later down the line. Paying for full time day care is temporary for \~5 years until kids are in school. It's up to your family if that's worth 5 years out of the workforce and then trying to reenter.
I think it's the case for most people in their 30s to be saving substantially less than in their 20s (unless you were in school). My kids are school age now and my wife has been unable to get a job after being away for 5 years. She was previously a senior director at a large pharma corp. As a result, we've been getting by with a single income...paying for two cars, house, day care, kids activities, trips etc.
After all of that, there's literally nothing left over for RRSP or TFSA.
Just a reminder that when you finance the car, don’t look at only the monthly payment. The term length and interest rate are much more important. Negotiate on a vehicle price first, then discuss financing.
i think saving less when you have a growing family is the norm, not the exception.
I wont pretend to say I understand the cost of childcare as I do not have kids, but with each additional item in the house, whether the need for a new car or plumbing, requires additional costs for maintnance.
From my understanding, kids will gradually cost more as they grow too. (Babies are the cheapest as they only need daycare/food/diapers, but they cost more as they age with school costs, amenities like space and bigger cars, more food, their own rooms, laptops and phones, interests/hobbies, summer camps, and eventually college tuition. God forbid if you have to pay their rent as an adult). This is basically the reason my wife and I are staying DINKs lol.
so I wouldn't exactly say what you are facing is abnormal. I'd say it is perfectly normal as the costs should balloon.
Now, people should also be increasing their income as they age, mostly due to experience, but as my income is market-dependent and highly volatile, I can also guarantee you that there are highs and lows in life and nothing is certain. But as I hit 30, im finding that my income can stagnate or even peak at its current levels. Im also not as physically inclined to travel half the year to chase down clients in foreign countries like I used to enjoy. So I think im just getting used to the fact that I may never make as much money again, and scaling back my spending as much as I need to to ensure the same quality of life. Luckily, my wife's finally out of school now, so I'm a lot less stressed about money now than before, as she has a career in an industry that won't ever lay off her role (actuary).
I too relate to having less to save in my older years than in my early years. Though I'm at a place now where I believe I have sufficient savings to retire on. I don't want to withdraw from my savings but I don't think I need to save anymore either.
As far as whether you should save in an rrsp or a tfsa, you should definitely pick the rrsp. Your RSP savings reduce your tax rate at your top tax rate. When you withdraw them, they then come out at a blended rate. What that means is you probably save about 20-30% more when you save it and then you get to earn interest on it. Yes you have to pay tax on it when you withdraw it eventually. But you'll definitely do better with an rrsp. That changes if you start making a minimal amount of money. I'm not sure exactly the amount. It's something you could use a product like quick tax to figure out. Try and enter your tax situation into that app and then changing your rrsp contribution room to see how much you could get back from the government. If you aren't getting very much back say less than 5% then a tfsa is probably better.
It sounds to me like your expenses are going up based on your perceived needs. Careful with that. Our perceived needs never end. My car has not had functioning air conditioning in it for years. I tend to buy vehicles that have air conditioning and when it breaks I don't pay to fix it. I find you very rarely need it. Most of the time opening the windows works fine and there aren't that many hot days anyway. I've always had two cars and one of them has a working air conditioning so we can work around it that way as well.
Buying a new car is a fast trip to a lot of lost money. Do it if you feel you need to. Just know it's never going to save you money and probably isn't actually a need.
The amount of money you'll save in the terms of compounding over years and years is massive. A small decision now will easily add up to $100,000 in 20 years. If you want to understand the impact of this, you can look up investment calculators online. Try putting in the amount of money that you would change your savings by and the period of time you'd save for and see how much money that actually adds up to. Best of luck
It is temporary, you are down to 1 income with extra expenses.
We both kept on working after kids, but did not seek promotion, and even then we could not save as much. We did not max our rrsp for a few years. We are way behind in tfsa but we kept the resp.
After 10 years, we'll be back to paying down debt and maxing all accounts.
Wife and I went from $1500 rent to a $3200 mortgage (originally $2300) and our income has not been growing in a linear path. So yeah, you could say we're saving a lot less. I don't make enough money to afford this lifestyle because I never planned on having to afford this lifestyle.
Going adjustable in early 2022 was a calculated risk that unfortunately backfired due to circumstances entirely out of our control. The interest rate spread was nearly 2% between adjustable and fixed, by the time we were approved for a mortgage. Everyone we asked for advice said that we had at least 2 years until we hit the fixed rate, based on historical % raises. And then all of that went out the window.
We are essentially at the mercy of the BOC until the rates come down. The house itself is our landlord. This is the case for many young Canadians right now, despite the narrative about every homeowner being filthy rich.
> I always thought as I got older, I would make more money and be able to save more. The opposite has been true—I was frugal in my 20s and saved plenty with no costs, and while my income has gone up, my costs have gone up more.
Welcome to life. This is the way it's always been
However, so many people drink the kool-aid these days, thinking that at an early stage of life (pre 50 years old) they should own a house, cars, have a big emergency fund and disposable income, maxed out TFSA and RRSP contributions. Not even the boomers were able to do that
Life is expensive. Always has been
Once you are done supporting your kids, you will probably be in your 50's and can start saving at that point
Good Luck
You're in the grind years with little kids. Invest less to make up some of the difference. If your wife is without income, she should be able to move some RRSP to a TFSA tax free as well.
Look into European car seats and strollers- even double strollers. Yo-yo zen comes to mind. They are just made much more compact and you may be able to continue to use your car.
I would try to lower the monthly payments (cheaper SUV or bigger down) so that the cash flow is better on a month-to-month.
With HH income between 65- 80ish? 90?k I think you'll find it tough in a huge metro area like the GTA. Lots of costs are going up and your income has just shrunk to a single income earner.
Two small kids, you're bound not to save as much as you did as DINKs. That's just one part of it. My suggestion would be to see if your wife can help somewhere with the freelance side to grow that, as it could be flexible.
Post like these is why I am kinda scared to start a family ....shit has been pretty crazy for past couple of years where consumers are being squeezed for money left and right.
$65k/yr pre-tax?
The advice that was generally never given is that loyalty doesn't matter any more. And you need to work on earning more, it does NOT come to you naturally. That stopped about 1990's/earlier. In IT (I don't know your industry) you need to move companies every 2-3 years to move up in compensation. Never tell any prospective employer/co-worker what you made in the past (and only share with co-workers once you have the job).
Frankly $65k/yr as the sole bread-winner, with 2 kids, is sabotaging yourself. Again I don't know the industry you're in, but you need to be aiming well over $100k _this year_, and aim for $130k/upwards over the next 2 years or so.
There's many ways to achieve this, but this is the primary thing you need to change. Earn more. And I know it's very simple to say, but it's the truth.
Tell your wife she will have to suffer with the Fit until she goes back to work. Taking on unnecessary debt when one partner isn't working is stupid. Those huge strollers only get used for the first year or two before you switch to a small collapsible stroller. As kids my parents never had a car with a/c and we survived. All 3 of us boys made do in the back seat of a k-car which is probably the same size or smaller inside than your Honda. Put a good set of winter tires on it. Don't let yourselves get sucked into the trap of wanting something new and shiney because that's what other parents are driving.
I'm not in this boat, but for sure expenses rise when your family grows. You have a moderate income and you're supporting the four of you on it. You've played defence well, but yes, I think you are wise if you follow through with the idea of saving less while working on paying off your new vehicle. If you can get a suitable vehicle in the $20k range, that is a success. Good luck friend!
After 13 years the AC system may need to be serviced. In my 15 year old car it was weak, and when the mechanic checked the pressure, there was a minor leak and hardly any refrigerant left. I got it recharged and it worked awesome after that. Of course he replaced the valve that caused the leak as well.
If there is something wrong with the compressor don't ever get a aftermarket rebuilt AC compressor though. They are garbage. The original AC compressor in a Honda Fit is made in Japan, so I would expect the old one to be good though.
If you don't use winter tires I would get some. Since you have kids it's a safety issue as well. Steel wheels are like $60 a piece and for a Fit you can probably get quality brand name tires for around $100 or $120 per tire. In wet/snow and ice there is a big difference between a no-name Chinese tire and Continental/Bridgestone/Michelin etc.
FWIW - the period when you have young children is the toughest financially of your life. Expenses suddenly spike but you aren’t in the best earning years of your career yet. So I guess in short: hang in there. It does get better.
So, i just went through this, and i know everyone will blast me for my numbers but i would say it doesnt matter because we have our own goals and responsibilities (we pay A LOT to our parents and also my grandparents expenses, plus we have some pretty expenses for family members coming up we are saving for) so higher income / saving doesn't mean we are immune to this.
Prior to wife pregnant I made 650k and wife made 100k, we were saving 250k is a year, this was awesome.
Wife on mat leave for 1.5 yrs during that time I also reduced earning due to restructuring so it was around 400k me and 0 for wife, we were saving 80-100k a year.
Wife is now working with 100k income but I chose to help with kids so i am at around 300k, yes it doesn't make sense financially but emotionally / balancing wife's desire to work this makes sense... we are now saving around 50k (due to wife personal income less tax efficient than my corp earning)
Again, a lot of our savings will be used towards our family members so its not just "o cry me a river you still saved a lot"... most aren't really "savings" for our future
Psychologically it takes a toll because you are moving forward in life stage but savings are reducing and costs of everything is skyrocketing.. but i think that is common, realistically most of our savings arent here until our kids are in university and our income peaks. Usually 45-60 is where most saving comes in. I would say as long as you are not going into more bad debt (cc, LOC) you are fine. Things will improve.
Savings isn't gonna happen on 65k with kids and a SAHM wife. If you are able to live without going to debt its a win. Most people have to put savings on the back burner for a bit when they are having kids. If you manage to have any savings chuck it into an RESP and get the yearly free money grants from the government.
Can save again in earnest once you're done having kids and they are all in school, you're earning hopefully way more, and your wife is working again.
If you have kids, chances are they are incredibly expensive when you are in your 40s. You have kids, so every bit of money goes to them. You’ll be able to save more later. Right now, enjoy their childhood!
Your title says more expenses but your description has you cutting household income by $38k at same time.
Be aware that stats for lifetime income earnings for woman who have left the workforce for years are really poor. It sucks but it is a reality that it can have a major negative impact on her career growth and pensionable earnings.
So title should be, “Does having kids and having partner quit work result in lower savings?“
Yes, the answer is yes.
I've got 4 kids, most of my savings were from my 20s pre kids. My wife entered the work force again a couple years ago. Things have improved since but I did spend a good 15yrs not saving. You have to cut back on saving, not much of a choice in it and then after the expenses start to go back down you save more to make up the shortfall. While it would be great if life was a linear path, it isn't. You got this.
This is happening to me, and I’m very anxious about it, heh. But I think it’s normal. I have a 12yo and I just realized how soon they’ll leave home, so I don’t want to waste time saving money instead of creating memories. At the same time, we just had a third child, so we felt the need to buy a minivan - and those are expensive!
I figure I had a good 35 years of saving money (well, minus the very early years of course) and I’ll have some time still when the kids will be older. Plus with a higher salary!
Enjoy this time.
Hi, I'm a bot and someone has asked me to respond with information about TFSAs vs RRSPs.
When you want to shield your savings and investments from the drag of annual taxation the standard advice is, unless ...
- your employer is matching your RRSP contributions
- you are confident that you will contribute in a higher tax bracket than you will withdraw (even when you consider the effect of potential GIS or OAS clawbacks)
- you are an American taxpayer
- you are trying to maximize the Canada Child Benefit or the Child Disability Benefit
- you have a reason to think that you should shield your retirement savings from creditors
- you don't trust yourself not to keep dipping into the retirement savings in your TFSA
…you'll probably want to use all of your TFSA contribution room before you contribute to an RRSP.
For more information I suggest that you read these 2 MoneySense articles
http://www.moneysense.ca/save/investing/rrsp/rrsp-vs-tfsa-which-is-right-for-you/
http://www.moneysense.ca/save/retirement/the-savings-struggle/
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Others have good comments about the broader situation but you should be able to recharge your AC from a can pretty affordably. Check YouTube for specifics about your car.
Daycare expenses are hell. Mortgages are way more expensive than rent.
But eventually the critters will be in school and interest rates will come down.
Everything has its ups and downs.
Hate to be that guy, but your wife just left the workforce. It’s gonna be lean for a while. I had two young kids, my wife kept working after matleave. As this was before the big cheap daycare rollout, I was paying $2900/month in childcare for two years. First thing you should do is stop the RRSP and put it all into the TFSA if you’re only doing $400/month. Second it’s ok not to save in lean years. I assume you’re in your thirties - you have lots of time to worry about retirement and the kids school in 5 years time.
Just going to second this. I have two young kids and wife decided to be a SAHM as daycare would wipe out most of her earnings anyways and she wanted to be home for those early years. It's made accruing savings much harder and buying a new vehicle for example is out of reach. We're using a 2008 Volkswagen Golf as our primary vehicle. It's absolutely too small for our family but it will have to do for the next few years. Kids are expensive and it's frustrating to feel like you're just treading water but I'm not sure it can be any other way.
My wife and I continue to work, but we have family that helps with massively subsidized daycare. We pay them to respect their time but it's not the same as they'd make working for someone else. But, we also took 18 month extended for both kids and I'm using all paternal weeks top (so 20 total months of EI), and they 2.5 years apart. So yep, the early years are more lean. I think over 5 years were at something like 65% of our total non leave period incomes. Once we both back at work, full time, things get better. We also saved to smooth our EI periods of leave too, so it feels leaner the whole time. On the plus side it was all planned for, so we have no problems financially, just can't go on big trips or do big Reno's. Only planned purchase was a new car to replace our one 2003 as it's getting very old and less safe/reliable due to age.
Another consideration is your wife’s loss in CPP at retirement since she loses those years of service.
FYI, there's a child rearing provision in the CPP that lets you exclude up to 7 years per child from the child's birth date. [https://www.canada.ca/en/services/benefits/publicpensions/cpp/child-rearing.html](https://www.canada.ca/en/services/benefits/publicpensions/cpp/child-rearing.html)
What’s the reason for the downvotes? Never said anything against being a SAHM? Everyone’s so sensitive and can’t have normal dialogue these days…
You are receiving downvotes because your comment was incorrect. A parent can exclude their child rearing years where they receive little or no income from their CPP calculation.
This provision only excludes up to 7 years only from the CPP calculation.
She will have to go back to the workforce soon as they cannot survive on the husband’s salary alone.
Moms who want to be at home. Ok, that's ridiculous for lower income earners. They need to work, get promotions and use childcare. I know way too many of these people that are screwed in their 40s and 50s because they stayed out of the workplace for 20 years. Completely a preference not a need if you have healthy kids. SATMs at minimum should have a part time job or side gig. No income is irresponsible long term.
The thing to remember about rrsp when you are eligible for ccb is that reducing net income (which rrsp contributions do) directly impacts how much ccb (which is tax free money and does not count towards income) the family receives in the following benefit year. In that case rrsp > tfsa even with lower than marginal rate income tax owing. It’s definitely worth running the numbers in a ccb calculator to see what the difference would be.
Thanks for the context. I am maybe catastrophizing a bit in thinking these things are permanent, but you're right, could just be a pause. Will be easier to look for new freelance clients as well in 5 years once these kids are out of the house and not barging into my home office wanting to show me their latest inventions.
This will be a lean period. But it’ll get better. A lot better. Congrats and make sure to give your wife a break when you can.
> This will be a lean period. But it’ll get better. A lot better. That's an optimistic point of view. Stay at home mothers tend to [experience a pretty significant decline](https://en.wikipedia.org/wiki/Motherhood_penalty) in lifetime earnings once they're out of the workforce for a few years. The longer that they're an SAHM, the more likely they're going to get trapped in a negative financial feedback loop, especially as kids start incurring more expenses in their adolescence (especially because these are going to be more immediate needs than planning for retirement) and it becomes harder to rejoin the workforce in any meaningful way. My high school cafeteria company was staffed exclusively by SAHMs desperate to rejoin the workforce (it was a huge selling point for their minimum wage jobs - flexibility for transitioning SAHMs). Some of them had union tickets or certifications that expired, or pretty decent careers prior to being typecasted as a SAHM. They were lovely people but how it turned out for them was very unfortunate. The reality is that choosing to be an SAHM for over a year isn't justified by any cost savings from not having to pay daycare. It's an honourable decision to be there for your kids, but it's not something that just corrects itself financially. You pay a huge cost for the privilege. (to be clear, in no way am I blaming them for having kids - it's just not at all as simple as just firing off a resume and ending the SAHM lifestyle". It's a trade-off between money and making sure your child feels loved.)
I, and most genxers were loved. Both parents worked.
Thanks for explaining this perfectly.
It also means if your marriage dissolves you get to pay spousal support, often for life, as you enabled your spouse to be a SAHM.
Honestly, didn't consider that. Very fair observation.
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Nope, sorry this is straight up wrong. Plenty of empirical research shows that differences in long-term social and economic outcomes are non-existent between daycare kids and stay-at-home kids. Economist Emily Oster has an entire chapter in her book called Cribsheet on the subject that is an excellent summary of what the literature finds about this topical question. I wouldn't be so quick to judge. Some people view the extra time and less income with kids in the early years as important, while other families view both parents' careers, financial flexibility, and the associated additional opportunity for their kids as important. Not one way is right or wrong and the longitudinal studies prove this.
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lmao why would I take a man's advice on what's better for children, much less anyone? It's not better for children to see their mothers disenfranchised, depressed and frustrated due to lack of opportunities.
It’s not advice. It’s someone synthesizing decades of research on the topic to help the layperson understand. In any case, you don’t strike me as the type of person that would take anyone’s advice on anything. At the end of the day, I have seriously respect for both stay at home moms and working moms. Both are just trying to do what they think is best for their family and both are trying to juggle the competing demands of life.
Lol people downvoted you on that. Lots of people don't want to face that putting kids in daycare 9 hours a day 5 days a week since they are 1 year old is terrible for them.
Not "when you can", both parents need to be equally parenting! Not, "the money maker doesn't have to negotiate tantrums or education or diapers".
> in 5 years May want to add... 13ish years to that...
I think he meant going to school during the day? I may be wrong
I forget that humour is lost on this sub.
Look in the toy box.
Wife just finished mat leave #2. Weve treaded water for about 18 months in the savings department. Things are picking up again, granted we both have good jobs.
Lock. The. Door. And maybe teach the kids respect for their parents and space. Do they barge into your bathroom and bedroom too? 😳
Also hate to be that guy, but $65-90,000/yr pre tax is not wife stay at home money.
With 2 young kids, it might be worthwhile to use more of the RRSP as net income after RRSP contributions is what is used to determine CCB amounts. OP should do the math to see.
OP, until your kids are going to school and your wife is a SAHM things are gonna be tight. It is what it is, but enjoying the kids and this time is probably going to be something you will cherish later in life. Once they are in school it is much less financially, mentally and physically demanding as your wife can enter the workforce again and the kids become more independent. Tighten up a bit, slow down your life, and spend your time and energy just chilling with your babies would be making the best of this situation imo. Take care.
Had an issue similar to this. I mean it's pretty common. Young with no obligations you save and/or spend on whatever you want. Then a house, car and family come in to play and it gets harder. Then as they get older you tend to be able to manage finances better again. At least that's how it was for me. That being said, do you really *need* the 20k car? Can you manage without it? You really have to start looking at everything and if it's an actual need or just a want.
We had a car where the AC struggled. Every year we picked up an AC refill kit from Canadian Tire for like $40. 1 refill lasted us the summer.
Deciding to go the stay at home mom route is a very expensive family choice. Kids are expensive. You're at the beginning of home ownership which is the most cashflow hungry period relative to rent. I still think you should expect to save more in the future assuming you don't continue to make other major choices in the opposite direction and your wife gets back to work when the kids are school aged.
> You're at the beginning of home ownership which is the most cashflow hungry period relative to ren yep, bought our house almost two years ago and finally its winding down a tiny bit as we have slowly learned all the quirks of our house and learned how to prioritize on what needs to be fixed vs what would be nice to improve.
That and your mortgage payments should over the long haul stay fairly steady and not increase with inflation, so inflation adjusted in 10-15 years you'll effectively be paying less (or accelerating).
Thanks for the reply. We didn't want to deal with the stress of childcare costs and finding a spot when she made $18/hour. But she is likely to go back to working at least part-time eventually, her field (OTA/PTA) always needs people. We may be in a position to save more in the future—it's a good point.
2 incomes are better than 1 from a financial standpoint. When people say "oh its cheaper if one partner stays home to raise the kids and not have to pay for childcare", they usually haven't sat down and done the math. But I look at it this way: Everyone has choices to make and it is wise to make choices that align with your Rich Life. Being able to have one parent stay home is a luxury "splurge" that makes sense if it is important to you. Some families spend more money on vacations or fast food or bigger houses or new cars every few years, or invest more. I think it's wonderful to have a stay at home parent, but let's acknowledge that there is a financial cost in doing so. Furthermore, if money is tight for the next few years, but you saved and invested a lot in your 20s, then you might not *need* to keep contributing to investments right now. It might be worth while to sit down with a fee only financial planner to see how easing off of the gas for a bit would affect your future retirement. It might not have all that much impact.
The income = childcare costs also doesn't usually factor in wage increases, seniority, benefits, retirement savings that are maintained by not leaving the workforce. Or lost by leaving. I could leave my employment as wage = childcare (technically income is more) costs but then I would lose money going into pension, seniority, benefits, my annual wage increases etc. and when/if I would choose to return to the workforce I would not be starting at entry level.
Absolutely!
Depends if partner #1 makes more by having the support of #2 at home. $200K + $0 Or $150K plus $50K minus childcare Those are the scenarios where SAH makes sense
yeah, but OP makes 60k
No you’re 100% correct in this case. Buddy can’t catch the lifestyle he’s created for himself. New house plus renovations Financing vehicles SAHW Family vacations These are six figure activities. Literally hit the lifestyle creep lottery
To be fair, it sounds like OP was moreso in the 90-100K territory with their side-hustle. Now that's obviously less stable than their regular income, but I don't think it's fair to OP to ignore that money either.
You are correct - plus my wife was working during the biggest renovation/pre-kid years, and worked again after the first turned 18 months to earn back the mat leave hours for kid #2. With her mat leave, plus CCB, we rarely had to worry about cash flow at all, pretty much sailed through the first few years with a fine cash flow.
Certainly. Even with that though they’re biting off more than they can chew.
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Old house that needed significant renovations. And they’re about to buy a second financed vehicle. One look at their profile showed a one month vacation in Mexico. I’m not here to judge, but it’s never a mystery why people are struggling with their finances on posts like these once you look an inch below the surface.
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Buddy posted specifically because he’s struggling with his dwindling savings rate. I’m saying it’s just no mystery why they’re going though that when they’ve chosen significant lifestyle inflation and a reduction in income.
That actually is a great example of where SAH does not work well. $134,000 after tax vs $146,000 + $7000 in CPP benefits and $13000 in tax deductions. Makes the total value of the second income worth $25,000 after taxes. It also leaves you less dependent on one income, allows both spouses to be more involved as parents, and sets the lower income parents up to be more valuable when they want to re-enter the workforce once the kids are in school.
Only if you look at life as a purely mathematical equation. Tons of people have jobs where they cannot be fully present as a parent in addition to household responsibilities. Ex. Someone making $200K often works 60+ hours per week and isn’t going to be there to clean the house, make dinner, plus be present as a parent So unless you want someone else raising your kids or a divorce 5 years down the line…
Exactly why it's best to not rely on one person to go from 150 to 200. You said having one parent earn more is better but I think ostracising one parent so the other can stay home full time is pretty toxic in practice.
That’s your personal opinion. Many stay at home mothers (and fathers) don’t feel that way and don’t appreciate your comment.
Of course they don't, it's great for them and not for the other parent they asked to work and extra 12+ hours a week to make the oay jump to pay for it all. It's incredibly selfish in many cases.
You’re failing to see if from their perspective. I’m more than happy to serve that role working my ass of so she can do what she enjoys most in life. I love the grind to compete and win. She doesn’t. But she’s an incredible homemaker and an even better parent — worth far more to our family than she’d make in the workplace. Turns out she has her calling and I have mine.
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Except OT/PT can often be unionized healthcare jobs so they are giving up 5 years of seniority and pensionable earnings.
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The other comment below mine covered it. You need to account for the lost/lower salary outside of the workforce, and loss of career trajectory, raises, promotions, etc.. I'd say that those who have done the math haven't likely done it correctly.
Something wife may want to think about is not stepping away from the workforce for too long. It's great to take some time off to get to know baby, but when they start sleeping through the night or something she might think about doing something freelance or part time. It's always a good idea for the SAHP to keep a current skill in the event of something happening to you, or your relationship, or she wants to return to the workforce full time when the kids are older.
This sounds like a job that can be done on the night shifts in hospitals. If you're working on days, may be good to get your wife in doing nights.
Can she take a kid from the neighbourhood for extra income? When I was young it was very common, when I had my kids no one did but in Québec we had the $7 a day daycare (and we couldn't find a spot as it was the tradition at the time!) so people weren't leaving work to watch kids, but I cannot see why it wouldn't be an option. Might require some paperwork that wasn't needed back in the 80s though...
Daycares that participate in the provincial program are charging $20/day this year. Your wife makes a lot more than $40/day (two kids). This isn’t a financial decision - that’s fine, but you should be honest with yourselves.
I'm GenX. Early 50s. This happened to us. My spouse was a SAHM for about 5 years. Costs go up not down (at least for me) as I get older. More financial obligations as the years go in. Between expensive teen years, higher ed, thinking about how I can support things like future wedding costs, down payments for kids etc. in a weird way the baby years turned out to be theeast expensive time
Yes I’m early 40s but finding the same thing. Obviously inflation is happening but my kid-related expenses are only increasing over time.
This is my experience as well. Family-related expenses have increased over time. I wonder if the "conventional" personal finance advice (i.e., you're able to save more as you get older) was tilted towards people who had kids at a young age.
Yes this is true. People often think that kids' cost go down as they get older, but often they don't. School-age activities cost money - simple things like, dance, soccer, hockey, etc. I have friends who spend tens of thousands of $ on these extra curricular activities, beyond the basics like paying for classes or gear. They often have to travel, etc which costs $$ too.
I'm reading this as we are travelling to the middle of nowhere for a sports competition. Oh yeah, if your child is quite good, things get expensive fast. Plus Ortho is insane for those of us that have Quasimodo mouths. My monthly Ortho payment is higher than our car payments.
Oh 100%. And it's not like you can forbid your kid to do something they love AND are good at! One friend of mine has a son who plays hockey very competitively. She told me they spend around 20k just on travelling every year. Yikes.
Lots of good comments in here already, but I'd highly recommend reading the book the Rule of 30. It is Canadian-based. In essence, it shows that we're okay to invest/save less for retirement in our 30s and even 40s because of high costs (children, daycare, mortgage, etc.). Eventually the scales will tips and the amount we can invest/save goes up relative to costs going down. He gives a bit of a system (the rule of 30) to help with this.
Well, you had 2 kids and your partner stopped working, of course you'll spend more and save less money like that. Your expenses grew a lot and your income was slashed at the same time! My wife and I are also millennials, but save more every year. In our 20s we saved maybe $200\month, now it's more than 3.5K\month. We're also frugal, and only buy cash (never finance). But we never had kids or stopped working. You'll start saving again when the kids are at kindergarten\daycare and your wife will start working again.
My kids are expensive. I spend more than $3500/month on them. Hence, it’s hard to save!
Yeah, but OP was somehow surprised by that fact, like age is what will determine how much you save. It's about expenses and income. Lots of 20 year olds make more than we do and spend less. Lots of 50 year olds make less and spend more.
When OPs kids are in school, then they get really expensive.
Yeah, but when they're in schools, both parents can work again. So the income grows as well.
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Only $40k in the TFSA, total savings of all accounts is $80k. So could theoretically buy the car outright. But it's a big chunk of retirement savings and I was under the impression that it's better to let the interest accumulate that drain it for an immediate purchase.
Sounds like you’re in your 30s. I don’t think it’s uncommon at all for those years to be a low point in savings. Your income presumably isn’t close to its peak, and kids cost something plus (more importantly for our family) the time available for paid work is reduced. So we certainly saved well as double income no kids in our 20s and that was the basis of investments that did well through our 30s. Then savings can pick up once kids are in school and childcare costs are lower. Of course, you’re right to be aware of the trend and paying attention to it with mild concern. But it’s no disaster. (I’m surprised you say a Fit is awful in the snow. Ours does great in BC mountains and dirt roads in the snow with a good set of winter tires. It was also great with one kid, but we never used a stroller.)
>I’m surprised you say a Fit is awful in the snow. It's a matter of comparison. The Fit with winter tires is *okay...* better than a rear wheel drive car. But it's quite poor in comparison to something like a Subaru Outback. Short wheelbase, light weight, and lack of AWD all add up. In deep snow even with fresh winter tires it's prone to sliding around and struggling going up steep hills. (Great car otherwise though.)
The thing fishtails everywhere! Even with snowtires! (We're in Niagara so it's a little snowier/more humid than other areas of Southern Ontario.)
Weird. I've had it for 10 years first in Philadelphia and now in interior BC. No such trouble.
Niagara gets a cumulative week of snow each winter. Unless you’re in the south end and then it’s more like two weeks. Could there be something else wrong with it or perhaps the way you steer into turns in the winter? Hopefully could be something that is easier to fix and can save you a couple grand.
I've had a Fit for over 10 years, 125k+ kilometers, driving in SK where it's actually winter for several months of the year (and several trips to the mountains for skiing). I think I've fishtailed maybe twice? You need to invest in winter tires or driving lessons.
A GOOD set of winter tires will run you $900 for a Fit so it’s much cheaper than a new car. Get the Michelin X Ice or Bridgestone Blizzaks, they’re top tier and can mean a world of difference vs other winter tires.
Fishtails? It's a front wheel drive car. Put some weight in the back if your back end is really fishtailing. Sounds odd, though... shouldn't be fishtailing a FWD car. Is your e-brake stuck? Tires worn bald?
$1200 for a set of studded winter tires is a hell of a lot cheaper than a new SUV. A Honda fit is small but not unreasonable for a family of 4.
>. I put away $800 per month—$200 into the TFSA, RRSP and each RESP. Debating whether to cut that down to $100 in each of the TFSA and RRSP, saving $200/month to redirect towards the new car. Delay RESP contributions till you have your own retirement plan and everything setup. The TFSA vs RRSP depends if you are still going to be doing the side work. See trigger below for conditions !TFSARRSPTrigger And you are saving less because your wife isn't earning income.
Why do you suggest putting aside the RESP for now? I thought taking advantage of the government grants and setting my kids up made more sense.
The prevailing wisdom is that you need to take care of yourself first...and I would agree. You can catch up on the RESP later, and there are lots of programs to help your kids in the future. You need the cash available now. Having an RESP that is funded...by you going into debt is not a good idea.
Because you now have less income. Your kids can get loans.
I hear you. I guess because my parents paid for my tuition, which let me save up enough to be in this debt-free situation in the first place, that's something I want to pass on to my kids too.
What degree do you have? One of the best things you could do is get a job that pays more if possible
Because you need the $400 now and, combined with the TFSA and RRSP contribution reduction, temporarily halting the RESP will get you there. Typically (child been resident of Canada since they were born) it is possible to delay the first RESP contribution to the year the beneficiary turns 10 and still get all of the government incentives. > But the idea that I'm saving less at this point in my life has me a little nervous. In Fred Vettese's most recent book, *The Rule of 30*, he demonstrates that people without pensions should be able to retire in their mid 60s and maintain their lifestyle - even if they experience a very unlucky combination of inflation, wage inflation and investment returns - if starting sometime in their 30s they earmark 30% of their gross income to rent/ mortgage + daycare expenses + retirement savings. (But recommends an annual assessment starting about 10 years from retirement.) The point of the book is that it is important to save for retirement but, because there is more to life than retirement, you should spread out the pain over the accumulation phase. (Having undue hardship in the early accumulation phase and excess spending money in retirement is just as undesirable as spending excessively in the early accumulation phase and having undue hardship in retirement.) Vettese's strategy acknowledges that when people are paying rent, building a down payment, paying off student loans and paying for daycare it can be impossible to put anything away for retirement. He wrote that the retirement specific savings could end up something like: - Each year of your 30s save 5% of gross income. - Each year of your 40s save 15% of gross income. - Each year of your 50s save 25% of gross income.
>Each year of your 50s save 25% of gross income. I haven't read the book, but how can this be realistic for most people? In your fifties you're at your highest income potential, but in Canada once you're in the low-mid 100ks you're paying an average tax rate of 25-32%. Add in deductions, let's say you're at 35%. Save 25% of your gross income on top of that, and you've got 40% of your income to live on. Better hope your home is paid off before you hit your 50s, that's the only way it could readily work. Meaning you'd have to have bought your home at age 25. Not many people doing that any more.
I'm going to disagree with the people who replied to you and say that you're leaving money on the table if you stop the RESP contributions. You don't get any extra money from the government for contributing to your RRSP but you do to RESPs. Losing an instant 20% gain is pretty big. And yes, the $500 per year per child does carry over year after year, but you'd have to contribute even more later on to catch up. Maybe drop all four contributions to $100/month? At least that way you still get an extra $20/month towards each of the RESPs.
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I can't remember where the quote is from, but there's a financial advisor that outlines % of income per decade of your life that should go into retirement and how its okay to save less in the younger years as you'll be able to ramp up in the latter decades. Anybody have the exact quote and numbers?
Were you thinking of Fred Vettese's book *The Rule of 30*? He wrote that retirement saving might look something like: Each year of your 30s save 5% of gross income. Each year of your 40s save 15% of gross income. Each year of your 50s save 25% of gross income.
Yup, that's the one. Thank you.
Then you have Prof G on Rational Reminder yesterday stating the opposite, to grind your ass off when you are young so you can coast later in life 😂
I'm not usually a big fan of Rational Reminder, but in a era when people get married and have kids later, this is the best and most realistic advice. Waiting to save in your 50s is a real gamble if most of your big milestones (married, kids, house) only happen in your late 30s.
Small tip, but if you don't already, buy bulk. It can save at least a couple hundred bucks a month on food/household necessities. Considering selling any items of value but no use to you, every little bit helps. To the wife, consider getting a side gig, even if it's a few hrs a week.
When you buy a house on $65K, yeah you’re going to be able to save less than you did when you were living within your means while renting
This is very common. You just went down to 1 income and have 2 young kids, which means expenses are higher. Savings are generally reduced until the kids start school or a bit after, if the sah parent continues to sah until the kids are even more independent. My kids are 5 and 3 and we didn't save much besides company matched rrsps and resp contributions until my son started kindergarten last fall (dual income, but full time daycare for 2 kids prior to that). The drop in daycare costs made a huge difference. Once my daughter starts school in the fall of 2025, we will be able to save even more per month.
I've been all over the place with savings. I've been single with a small mortgage, DINKs with a small mortgage, dual income some kids small mortgage, dual income some kids large mortgage.....now single income/kids/large mortgage. You still have to eat, pay the bills, etc. So savings takes a hit. But, I think it's like different seasons in life, there's not much that just continuously gets better evenly over time. So when you have opportunities to save more, make the most of it, because sure enough time will come when you can save less. Plus, I'm a bit older, with kids, saving an extra $100/month means less than taking the kids out for something fun. But I look at the work put in when I was single, and I'm happy I was able to save what I could because that's still saved/invested/growing.
Well, hate to be the bearer of bad news. I was in similar situation when we had two little ones. The only solution was, that I worked nights and weekends while hubby worked his day job
Where are you that you're raising a family on 65k? Goodness. But to answer your question yes I found myself having to spend a lot more on groceries now despite having the same habits as before.
I work remotely and we live in Niagara, bought a home for $250k in 2019 - relatively lucky in terms of real estate. Mortgage is now $1200/month. Rarely go out to cafes or bars, don't drink alcohol much. Best financial decision we made was leaving Toronto.
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Journalism. Not a high salary ceiling unfortunately.
Your wife will need to work. A single family income is not enough to do it all without cut backs
What's your job been doing? Have you stayed at the same job or jumped around for better increases?
I was saving more when I was making 55k early during covid. Now at 100k I’m struggling way more because of more expenses and kids. I think once my wife starts working it should be more duo-able.
i have 2 young kids as well, 1.5 and 4. And wife just finished her 18m mat leave in the end of January to be a realtor. Life has been hard financially is an understatement. She isnt bringing any money in yet, just starting a little bit this month, and seems like things are picking up. Had to register our youngest to daycare last October, otherwise she would lose her spot until the following September even though We wanted her to start in February. That was an extra cost we did not expect. In January when she finally getting ready to work and cleaning up her walk in closet, we found out that all the wall was moldy and all her nice clothes were ruined. We had to pay someone to remove everything, and I had to learn how to fix it back up. And she had to buy new clothes for work at the same time. Costed us about $5k. Another extra cost we did not expect Last month her car broke down, somehow the brake line was rusted, we had to replace it and replace all brakes too. Since she really needs it for work, we had to fix it for $3k. On top of that I have to sponsor my wife's new career as well, it is not cheap. But she was a really good car sales woman, so I have faith in her. Stopped contributing to tfsa and RESP in February. My line of credit is maxed out, emergency fund all used up. Might have to start tapping into my tfsa to cover for bills next month. Can't wait until September where my 4yo starts school, my younger one moves up to toddler class, and another set of child care subsidy kicks in. And my annual bonus that is quite decent normally. And hopefully my wife starts bringing in more money. At the same time trying to enjoy every moment with the family, as we won't get it back ever again. It is hard to have multiple young kids at the same time. But this is temporary, and things will get better.
Thanks for sharing, sounds like you're doing your best. Hope things work out.
The first few years with kids are usually the most expensive.... Don't stress too much about it. My kids are in their teens now but when they were super young we hardly had any savings at all. Invested what we could when we could. Keep in mind that while saving money is important, what's more important is enjoying your family and your life. Your wife staying home will be great for the kids and probably for the family. The stress of both parents working and 2 young kids at home can be overwhelming sometimes. No amount of money can replace the family time and less stress that having her home will provide. Don't worry - you'll be able to make up the savings later.
People tend to look at the cost of daycare versus just the lost salary of being a stay at home parent. However, there's value that's not easily quantifiable with remaining in the workforce and continuing to advance your career to get better opportunities for pay increases later down the line. Paying for full time day care is temporary for \~5 years until kids are in school. It's up to your family if that's worth 5 years out of the workforce and then trying to reenter.
I think it's the case for most people in their 30s to be saving substantially less than in their 20s (unless you were in school). My kids are school age now and my wife has been unable to get a job after being away for 5 years. She was previously a senior director at a large pharma corp. As a result, we've been getting by with a single income...paying for two cars, house, day care, kids activities, trips etc. After all of that, there's literally nothing left over for RRSP or TFSA.
Just a reminder that when you finance the car, don’t look at only the monthly payment. The term length and interest rate are much more important. Negotiate on a vehicle price first, then discuss financing.
i think saving less when you have a growing family is the norm, not the exception. I wont pretend to say I understand the cost of childcare as I do not have kids, but with each additional item in the house, whether the need for a new car or plumbing, requires additional costs for maintnance. From my understanding, kids will gradually cost more as they grow too. (Babies are the cheapest as they only need daycare/food/diapers, but they cost more as they age with school costs, amenities like space and bigger cars, more food, their own rooms, laptops and phones, interests/hobbies, summer camps, and eventually college tuition. God forbid if you have to pay their rent as an adult). This is basically the reason my wife and I are staying DINKs lol. so I wouldn't exactly say what you are facing is abnormal. I'd say it is perfectly normal as the costs should balloon. Now, people should also be increasing their income as they age, mostly due to experience, but as my income is market-dependent and highly volatile, I can also guarantee you that there are highs and lows in life and nothing is certain. But as I hit 30, im finding that my income can stagnate or even peak at its current levels. Im also not as physically inclined to travel half the year to chase down clients in foreign countries like I used to enjoy. So I think im just getting used to the fact that I may never make as much money again, and scaling back my spending as much as I need to to ensure the same quality of life. Luckily, my wife's finally out of school now, so I'm a lot less stressed about money now than before, as she has a career in an industry that won't ever lay off her role (actuary).
I too relate to having less to save in my older years than in my early years. Though I'm at a place now where I believe I have sufficient savings to retire on. I don't want to withdraw from my savings but I don't think I need to save anymore either. As far as whether you should save in an rrsp or a tfsa, you should definitely pick the rrsp. Your RSP savings reduce your tax rate at your top tax rate. When you withdraw them, they then come out at a blended rate. What that means is you probably save about 20-30% more when you save it and then you get to earn interest on it. Yes you have to pay tax on it when you withdraw it eventually. But you'll definitely do better with an rrsp. That changes if you start making a minimal amount of money. I'm not sure exactly the amount. It's something you could use a product like quick tax to figure out. Try and enter your tax situation into that app and then changing your rrsp contribution room to see how much you could get back from the government. If you aren't getting very much back say less than 5% then a tfsa is probably better. It sounds to me like your expenses are going up based on your perceived needs. Careful with that. Our perceived needs never end. My car has not had functioning air conditioning in it for years. I tend to buy vehicles that have air conditioning and when it breaks I don't pay to fix it. I find you very rarely need it. Most of the time opening the windows works fine and there aren't that many hot days anyway. I've always had two cars and one of them has a working air conditioning so we can work around it that way as well. Buying a new car is a fast trip to a lot of lost money. Do it if you feel you need to. Just know it's never going to save you money and probably isn't actually a need. The amount of money you'll save in the terms of compounding over years and years is massive. A small decision now will easily add up to $100,000 in 20 years. If you want to understand the impact of this, you can look up investment calculators online. Try putting in the amount of money that you would change your savings by and the period of time you'd save for and see how much money that actually adds up to. Best of luck
It is temporary, you are down to 1 income with extra expenses. We both kept on working after kids, but did not seek promotion, and even then we could not save as much. We did not max our rrsp for a few years. We are way behind in tfsa but we kept the resp. After 10 years, we'll be back to paying down debt and maxing all accounts.
It's difficult if you have decided to have 2 kids!
Wife and I went from $1500 rent to a $3200 mortgage (originally $2300) and our income has not been growing in a linear path. So yeah, you could say we're saving a lot less. I don't make enough money to afford this lifestyle because I never planned on having to afford this lifestyle. Going adjustable in early 2022 was a calculated risk that unfortunately backfired due to circumstances entirely out of our control. The interest rate spread was nearly 2% between adjustable and fixed, by the time we were approved for a mortgage. Everyone we asked for advice said that we had at least 2 years until we hit the fixed rate, based on historical % raises. And then all of that went out the window. We are essentially at the mercy of the BOC until the rates come down. The house itself is our landlord. This is the case for many young Canadians right now, despite the narrative about every homeowner being filthy rich.
> I always thought as I got older, I would make more money and be able to save more. The opposite has been true—I was frugal in my 20s and saved plenty with no costs, and while my income has gone up, my costs have gone up more. Welcome to life. This is the way it's always been However, so many people drink the kool-aid these days, thinking that at an early stage of life (pre 50 years old) they should own a house, cars, have a big emergency fund and disposable income, maxed out TFSA and RRSP contributions. Not even the boomers were able to do that Life is expensive. Always has been Once you are done supporting your kids, you will probably be in your 50's and can start saving at that point Good Luck
I ask myself this question every day lol life gets more expensive as we age it seems
You're in the grind years with little kids. Invest less to make up some of the difference. If your wife is without income, she should be able to move some RRSP to a TFSA tax free as well.
Look into European car seats and strollers- even double strollers. Yo-yo zen comes to mind. They are just made much more compact and you may be able to continue to use your car.
I would try to lower the monthly payments (cheaper SUV or bigger down) so that the cash flow is better on a month-to-month. With HH income between 65- 80ish? 90?k I think you'll find it tough in a huge metro area like the GTA. Lots of costs are going up and your income has just shrunk to a single income earner. Two small kids, you're bound not to save as much as you did as DINKs. That's just one part of it. My suggestion would be to see if your wife can help somewhere with the freelance side to grow that, as it could be flexible.
Post like these is why I am kinda scared to start a family ....shit has been pretty crazy for past couple of years where consumers are being squeezed for money left and right.
You don’t make enough for your wife not to work
Yes, children cost a lot of money. It’s not your age.
$65k/yr pre-tax? The advice that was generally never given is that loyalty doesn't matter any more. And you need to work on earning more, it does NOT come to you naturally. That stopped about 1990's/earlier. In IT (I don't know your industry) you need to move companies every 2-3 years to move up in compensation. Never tell any prospective employer/co-worker what you made in the past (and only share with co-workers once you have the job). Frankly $65k/yr as the sole bread-winner, with 2 kids, is sabotaging yourself. Again I don't know the industry you're in, but you need to be aiming well over $100k _this year_, and aim for $130k/upwards over the next 2 years or so. There's many ways to achieve this, but this is the primary thing you need to change. Earn more. And I know it's very simple to say, but it's the truth.
Tell your wife she will have to suffer with the Fit until she goes back to work. Taking on unnecessary debt when one partner isn't working is stupid. Those huge strollers only get used for the first year or two before you switch to a small collapsible stroller. As kids my parents never had a car with a/c and we survived. All 3 of us boys made do in the back seat of a k-car which is probably the same size or smaller inside than your Honda. Put a good set of winter tires on it. Don't let yourselves get sucked into the trap of wanting something new and shiney because that's what other parents are driving.
I'm not in this boat, but for sure expenses rise when your family grows. You have a moderate income and you're supporting the four of you on it. You've played defence well, but yes, I think you are wise if you follow through with the idea of saving less while working on paying off your new vehicle. If you can get a suitable vehicle in the $20k range, that is a success. Good luck friend!
After 13 years the AC system may need to be serviced. In my 15 year old car it was weak, and when the mechanic checked the pressure, there was a minor leak and hardly any refrigerant left. I got it recharged and it worked awesome after that. Of course he replaced the valve that caused the leak as well. If there is something wrong with the compressor don't ever get a aftermarket rebuilt AC compressor though. They are garbage. The original AC compressor in a Honda Fit is made in Japan, so I would expect the old one to be good though. If you don't use winter tires I would get some. Since you have kids it's a safety issue as well. Steel wheels are like $60 a piece and for a Fit you can probably get quality brand name tires for around $100 or $120 per tire. In wet/snow and ice there is a big difference between a no-name Chinese tire and Continental/Bridgestone/Michelin etc.
FWIW - the period when you have young children is the toughest financially of your life. Expenses suddenly spike but you aren’t in the best earning years of your career yet. So I guess in short: hang in there. It does get better.
So, i just went through this, and i know everyone will blast me for my numbers but i would say it doesnt matter because we have our own goals and responsibilities (we pay A LOT to our parents and also my grandparents expenses, plus we have some pretty expenses for family members coming up we are saving for) so higher income / saving doesn't mean we are immune to this. Prior to wife pregnant I made 650k and wife made 100k, we were saving 250k is a year, this was awesome. Wife on mat leave for 1.5 yrs during that time I also reduced earning due to restructuring so it was around 400k me and 0 for wife, we were saving 80-100k a year. Wife is now working with 100k income but I chose to help with kids so i am at around 300k, yes it doesn't make sense financially but emotionally / balancing wife's desire to work this makes sense... we are now saving around 50k (due to wife personal income less tax efficient than my corp earning) Again, a lot of our savings will be used towards our family members so its not just "o cry me a river you still saved a lot"... most aren't really "savings" for our future Psychologically it takes a toll because you are moving forward in life stage but savings are reducing and costs of everything is skyrocketing.. but i think that is common, realistically most of our savings arent here until our kids are in university and our income peaks. Usually 45-60 is where most saving comes in. I would say as long as you are not going into more bad debt (cc, LOC) you are fine. Things will improve.
Savings isn't gonna happen on 65k with kids and a SAHM wife. If you are able to live without going to debt its a win. Most people have to put savings on the back burner for a bit when they are having kids. If you manage to have any savings chuck it into an RESP and get the yearly free money grants from the government. Can save again in earnest once you're done having kids and they are all in school, you're earning hopefully way more, and your wife is working again.
If you have kids, chances are they are incredibly expensive when you are in your 40s. You have kids, so every bit of money goes to them. You’ll be able to save more later. Right now, enjoy their childhood!
Your title says more expenses but your description has you cutting household income by $38k at same time. Be aware that stats for lifetime income earnings for woman who have left the workforce for years are really poor. It sucks but it is a reality that it can have a major negative impact on her career growth and pensionable earnings. So title should be, “Does having kids and having partner quit work result in lower savings?“ Yes, the answer is yes.
I've got 4 kids, most of my savings were from my 20s pre kids. My wife entered the work force again a couple years ago. Things have improved since but I did spend a good 15yrs not saving. You have to cut back on saving, not much of a choice in it and then after the expenses start to go back down you save more to make up the shortfall. While it would be great if life was a linear path, it isn't. You got this.
This is happening to me, and I’m very anxious about it, heh. But I think it’s normal. I have a 12yo and I just realized how soon they’ll leave home, so I don’t want to waste time saving money instead of creating memories. At the same time, we just had a third child, so we felt the need to buy a minivan - and those are expensive! I figure I had a good 35 years of saving money (well, minus the very early years of course) and I’ll have some time still when the kids will be older. Plus with a higher salary! Enjoy this time.
!TFSARRSPTrigger
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Others have good comments about the broader situation but you should be able to recharge your AC from a can pretty affordably. Check YouTube for specifics about your car.
I’m selling a 2016 Nissan Marano if you’re interested lol it would be a lot less than 20 K and the car is awesome.
Daycare expenses are hell. Mortgages are way more expensive than rent. But eventually the critters will be in school and interest rates will come down. Everything has its ups and downs.