In many Canadian families one parent will opt to stay home to look after the children, usually when the children are under the age of two or there is more than one child. It's often a financial trade-off for young couples - whether to spend money on daycare or struggle along on one income.
This is one of life's transitions and a good time to get some financial advice from a member of the Canadian Association of Insurance and Financial Advisors (CAIFA), such as Fiscal Agents. There are several long-term financial repercussions to consider.
The first concern is whether the
family can survive on one income - some financial advice may help you
change your lifestyle to live within a restricted budget. Remember that
couples with a single income are taxed more heavily than those who split
their income. The parent who quits a job to stay with young children loses
RRSP contribution room for the time that he or she is out of the workforce.
That can be addressed by using spousal RRSP contributions.
For example, stop and consider the
value of what Mom contributes to your family when she is at home. She
may not be generating an income but she is saving you both of bundle in
daycare costs, housekeeping costs and peace of mind. If she died, it would
cost $30,000 or more each year to hire a nanny or to replace what she
does with daycare and a housekeeper.
Young families on one income are often stretched for case but life insurance is not a frill. It may be possible to carry on a group policy from a former employer or to find insurance that meets your budget. Sit down with your Fiscal Agents insurance advisor to try to find a policy that you can afford and let them show you how a combination of mortgage insurance and term insurance can protect your family if one of you dies.
This article is
reprinted with permission from the Canadian Association of Insurance and
Financial Advisors (CAIFA), www.caifa.com.
© , Fiscal Agents Money Management Newsletter