# Unable to save with kids in daycare - Normal?



## adampeps (Jan 21, 2011)

Hi all,

I realize that every situation is different and there is no one solution, but looking at our finances coming up in June, I do not believe we will have much to save when we factor in mortgage, insurances, groceries, and 2 kids in daycare. The 2 kids in daycare cost is basically equal to our mortgage and property taxes. I feel like I have done a good job in preparing for this in that my RRSP's are maxed out. But other than my work plan (5% - they match 2.5%), I don't see us having anything left over for savings until they are done daycare. A little bit will open up when our first daughter is out but then there are after school programs too (albeit certainly not the cost of daycare).

I know most people would have obvious holes in their budget that they could take care of like car loans, discretionary spending, etc. But I feel we've already done this and are really only spending money on our needs (no car loans, we don't spend lots of money on other stuff). 

As I said earlier I know every situation is different but is it normal not to save during this period and still be able to retire at a decent age. I feel like this will set us back a bit but am hoping it is reasonable for a few years.

Thanks all,
Adam


----------



## Just a Guy (Mar 27, 2012)

It's called a trade off. Life is full of them. You want to have kids, kids cost money. People who choose to not have kids get to spend that money on other things or save it.

It's the same as if you decide to buy a big house, expensive cars, etc. There is a limiting factor in your life called an income.

Now, there is nothing saying you can't make changes to things like your income. This is the main area where I disagree with David chilton's the wealthy barber, he stresses lowering your standard of living by cutting spending, I believe in increasing your income through passive income.

Personally, I've got 4 kids...but I also have a couple of companies which I own, dividend paying stocks, and a ton of rentals. I didn't accumulated them all overnight, but I don't really have to work anymore and all of these investments have certainly ensured retirement and their education is more than taken care of. 

If I had only relied on a paycheque or two, I doubt I could have afforded to have 4 kids, I'd suggest you look at the path less travelled.

BTW, they get a lot more expensive as the years go by (sports, braces, hobbies, clothes, cars, weddings, post secondary, moving out, etc.), so don't try to convince yourself that things will get cheaper going forward.


----------



## adampeps (Jan 21, 2011)

Just a Guy said:


> It's called a trade off. Life is full of them. You want to have kids, kids cost money. People who choose to not have kids get to spend that money on other things or save it.
> 
> It's the same as if you decide to buy a big house, expensive cars, etc. There is a limiting factor in your life called an income.
> 
> ...


Thanks, I tend to agree with you too. I am trying to set up some passive income streams now but obviously they take time. Did you have all of these properties/investment/etc while your kids were in daycare? I feel like that is something we could do eventually but not now. This daycare expense is crazy but I did know it was coming and we wanted to have the kids close in age so were willing to make that sacrifice. I guess the big thing for me is knowing others go through this and have still made it to retirement years as planned.

Thank you again,
Adam


----------



## none (Jan 15, 2013)

Don't forget your kids RESPs - of course that cost is almost cancelled out by the tax credit of claiming your kids as dependents.

You do get a daycare right off which may allow you to save some money too.


----------



## adampeps (Jan 21, 2011)

none said:


> Don't forget your kids RESPs - of course that cost is almost cancelled out by the tax credit of claiming your kids as dependents.
> 
> You do get a daycare right off which may allow you to save some money too.


Oh ya of course, part of our expenses are still contributing to the children's RESPs. I was curious about the daycare in how much we get back from that. Will have to ask a little more about it.

But again is what I am going through normal? I'm meeting with a retirement advisor in a couple of weeks but until then my anxiety has been sky-rocketing.

Thanks,
Adam


----------



## OnlyMyOpinion (Sep 1, 2013)

I'd say you are way ahead if you are thinking in these terms. Most people don't. Take care that you and your spouse stay aligned on your priorities and saving goals. If you are both max'ing out your RRSP's that is awesome.
Before you know it your kids will be in school - that great state-paid daycare/education program (remember that when you hear people claim that teacher's have easy, overpaid jobs). Then those heavy monthly day care costs will be gone. 
But there will always be others as Just A Guy points out. So count on the equivalent of that monthly amount being used for something - at times it may be paying down your mortgage, TSFA's, new roof, saving for new car, vacation, RESP's, etc.
I think it is common to have a lot of your income tied up in these things until you reach your 40's or even 50's, so that it is only later in your working life that you are able set aside serious additional savings. But if you have kept your RRSP's max'd out over the years (and ideally TSFA's) you'll be ahead of most.


----------



## OnlyMyOpinion (Sep 1, 2013)

adampeps said:


> ...I'm meeting with a retirement advisor in a couple of weeks...


Lot's of controversy on this, particularly from those who are DIY. Remember, advisors (and their companies in part) make a living from their clients accounts. So be sure you know what you are paying and what you are getting for your money. You should not be locked into your investments with long term, onerous cancellation or withdrawl fees.


----------



## Just a Guy (Mar 27, 2012)

Never put my kids in daycare. I've always been self employed, so my life has always been more flexible than most. Some would call it more unstable, but I've been working for the same place my entire life, whereas all my friends have changed companies fairly regularly.

My company was doing fairly well when I started having kids, I had just started getting into investing as well. I had purchased my first rental, against the advice of everyone, having run the numbers and found that it was virtually impossible for me to lose money (the place cost 50k and rented at the time for $700/month (it now rents for $1150/month).

Then I got injured at work. It was bad, I couldn't work for year, had some savings but not enough to survive two years (and self employed people don't qualify for benefits, and it's amazing how many loopholes there are in insurance policies) first thing I did was buy another rental I'd been looking at. Now, most people wouldn't think of adding 100k of debt when facing zero income, but I needed to do it before the bank stopped giving me credit. The two rentals paid my mortgage for years.

I also invested a good portion of my savings in stocks, and learned to be very, very frugal (at the time I had 2 kids). Wound up going into a lot of debt, but watched it carefully always having a plan on how it would be paid off. I could have, at any time, sold the investments and "broken even", however that would have killed my only income stream.

Learned a lot about how the banks worked, used every trick in the book, and managed to increase my holdings. There were many sleepless nights, I can tell you, I also chose never to compromise on certain things like food quality, but I did whatever I had to do to make it work.

Eventually, my investments started to pay off...that may have actually been a harder transition. I'd been so focussed on being frugal that it took years for me to realize that we could probably live on our passive income alone, my non income producing debt had disappeared, I had savings again, my company had turned around...I was lucky and my stocks had done even better than I could have imagined...

I didn't really have a choice in my path, the other choice would have left us homeless, and I wasn't brought up with any knowledge of investing but starvation and homelessness are good motivators to inspire learning. 

It's why I always chuckle a bit when I read about people who are fairly well off talking about how they can't "afford" to get into investing right now...heck, these are the times when they can't afford not to get into investing. I turned my life around when I had no money at all, and no prospects of getting any (at least I had a good credit rating). I wasn't afraid of debt, used properly it's a vital tool.


----------



## none (Jan 15, 2013)

adampeps said:


> Oh ya of course, part of our expenses are still contributing to the children's RESPs. I was curious about the daycare in how much we get back from that. Will have to ask a little more about it.
> 
> But again is what I am going through normal? I'm meeting with a retirement advisor in a couple of weeks but until then my anxiety has been sky-rocketing.
> 
> ...


Here's a useful link for your RESP asset allocation if you are not aware: http://www.moneysense.ca/columns/taking-risk-in-an-resp/

'normal' is a weird thing. Lots of people can't afford a house AND have two kids ahead in daycare. Anyway, if you want to know if you are ahead of the herd you are ahead of some but way behind other parts. That's life though right? You are a pauper relative to many but flush with cash compared to others. Depends who you compare yourselves to.


----------



## Just a Guy (Mar 27, 2012)

adampeps said:


> But again is what I am going through normal? I'm meeting with a retirement advisor in a couple of weeks but until then my anxiety has been sky-rocketing.


Yes, it's normal.

Also, I'd take what the "retirement experts" say with a grain of salt. Find out how wealthy they are for example and how they made their money.

For example Davild Chilton's book says cut spending, invest in yourself, etc. But he made his fortune from investing, writing books, etc. The road less travelled.

Many investment advisors will tell you to get a balanced portfolio of mutual funds and bonds...yet, year after year, all we hear is how terrible people's returns are with this strategy...

Look at the horror stories you hear about real estate, investing on your own, being self employed, owning a company...

True it's not an easy path, and not the path for everyone, but it's also a path spoken of with fear, uncertainty and doubt by those who aren't on it.


----------



## none (Jan 15, 2013)

Just a Guy said:


> Yes, it's normal.
> 
> Many investment advisors will tell you to get a balanced portfolio of mutual funds and bonds...yet, year after year, all we hear is how terrible people's returns are with this strategy...
> 
> .


This is not true. Depends what funds we are talking about - and depends how you distinguish between mutual funds and ETFs.

If we are talking about low cost mutual funds or ETFs you couldn't be more wrong. Investing in a balanced portfolio with ETFs actually maximized the probability of ending a time frame with the most amount of money.


----------



## Mechanic (Oct 29, 2013)

Back when our kids were in daycare (30 yrs ago) my wife and I would wonder whether it was worth it for her to work, as daycare costs ate up most of her income. The little bit that we were ahead though was enough to make a difference in our lives. It was still a struggle to pay mortgage, insurance, living expenses etc. I don't think that has ever changed, although with higher paying jobs I suspect there is a lot more left over these days. My kids are now married with their own families and both families have decided it's not worth it and are stay at home mums. It comes down to your own situation and choices.


----------



## Just a Guy (Mar 27, 2012)

You're saying all retirement planners give this advice? If so then why is anyone concerned about retirement?

As for maximizing your return, that's garbage. There are many people who do much better than the returns on a balanced low cost portfolio...but, of course, you are talking about people who hand over money blindly hoping others will take care of it for them versus people who take the time to educate themselves and buy good investments.

Not one ETF comes even close to the returns I get on a rental for example. $0 invested, 17.5 years later I've got a property worth money clear title, a monthly cash flow dividend, and it was completely paid for over that time period, probably more of a sure thing than the market's but, at worst, equal in the amount of risk.

To be fair though, my stocks have had a much greater capital gain than my real estate, so each has it's advantages.


----------



## tygrus (Mar 13, 2012)

Just a question, where does your child benefit allowance go? 

You really need to do a proper cost benefit on this. I am guessing your day care costs more than $1200 a month, then you need to earn almost $2000 to pay for that before taxes. 

Now if one of you could stay home, then you save that cost plus lessen your overall tax burden and if that person could work out of the home part time, you could recoup a some of the lost income but then you could also deduct household expenses. I deduct 30% of my mortgage interest, all my cell phone and internet and 30% of my other utilities because I run a business and my corporate office is my home.

Its not always about earning or saving more.


----------



## Daniel A. (Mar 20, 2011)

Back in the early nineties we were paying 1000.00 a month with one in full time daycare & one in after school care. 

Our incomes were in the top 10% by revenue Canada standards and we spent what my wife wanted, I often thought that if our income had been average it would have been hard. 
My thinking at the time was I have a decent DB pension plan as did my wife so saving was not a priority.

Neither of my kids were interested in things like hockey that can cost a ton of money.

I did watch other co-workers spend big on things like hockey and travel to out of town for tournaments that got really costly to the point where they planned vacation time for such things. 

I retired at 56 some 6 years ago with my RRSP topped up.
I still work doing things part time on my own schedule but none out of need. 

Sounds like you have a plan by keeping your RRSP maxed and that should remain a priority.

One thing that helped in those years was that as long as my wife worked she was contributing to CPP max every year so her CPP is as good as mine.


----------



## tygrus (Mar 13, 2012)

OP, another thing I have started to do is go against the consumer grain. Beleive me there are thousands of dollars in savings right there an no impact on your life style. That money moustache guy lives like a hermit so I am not talking about that. 

For instance, we used to eat out a couple times a week, but in reality we were going to mediocre restaurants and dropping $100 and not being satisfied. I found out I was happier having a grilled cheese sandwich at home with my kids. I never rush out to movies anymore, wait a month and they are on PPV for $5. Dropped 90% of my cable channels - boring garbage. And I always buy cars about 2 years old and then drive them until they are dead. I never worry about brands anymore.

Along with that I am trying to align my life with more memorable experiences rather than stuff.


----------



## Ethan (Aug 8, 2010)

adampeps said:


> As I said earlier I know every situation is different but is it normal not to save during this period and still be able to retire at a decent age. I feel like this will set us back a bit but am hoping it is reasonable for a few years.


You are still saving. You have your work RRSP, you and your wife are contributing to CPP, and through your mortgage payments you are reducing your debt.

I think the question becomes "is it normal to save less when the kids are young?" I would answer yes, this is normal. Not only have your expenses gone up, children take time. Over time, your wage should increase at least with inflation, while your mortgage cost is fixed (and should eventually decrease to nothing). Kids require less attention as they get older, the cost of children will vary as it depends on what activities you put them in.

Since you are both working, with maxed out RRSP's and a house you are paying down I don't think you have much to worry about. Your ability to save will increase over time, this is a situation most young families go through.


----------



## Ethan (Aug 8, 2010)

I'm enjoying going through this thread as we are in a similar situation. My daughter started daycare this month, and we are hoping to have our second kid in ~14 months.


----------



## Curiouscreature (Jan 3, 2016)

Daycare years are tough, enjoy the time with the kids, they grow up so fast. Don't buy too many luxury items and budget hard. If you can pay all your bills and not accumulate debt during these years, you are getting ahead. You can at least invest your tax refund at the end of the year for the years you are paying hefty sums of daycare. Biggest mistake is taking that money and treating it as "free" money.

Most important thing is to realize you are not alone, for many families those are lean years unless you are making a tremendous amount of family income. It gets easier. Good luck!


----------



## lost in space (Aug 31, 2015)

Just a Guy said:


> It's called a trade off. Life is full of them. You want to have kids, kids cost money. People who choose to not have kids get to spend that money on other things or save it.
> 
> It's the same as if you decide to buy a big house, expensive cars, etc. There is a limiting factor in your life called an income.
> 
> ...



I'd be interesting in knowing more how you did this, especially the rentals. I know it can be done as others on other forums have done it, thinking Arebelspy from Triple M fourms.


----------



## Just a Guy (Mar 27, 2012)

I've gone over if a few times, the last time was about a month ago...can't remember which thread exactly, but it shouldn't be too hard to find. 

You could also check out www.easysafemoney.com, his system is very similar to how I started, and he's got a good book on it.


----------



## adampeps (Jan 21, 2011)

Thanks all, just got back now and some very helpful replies to my situation. Our daycare will be $690 bi-weekly so ya it's a tough pill to swallow. My wife and I both have good jobs (in my opinion, make more than average for sure) but feel like even at that level there isn't much left over for anything else. I don't have a pension so not being able to save extra on top of my work plan has always been important to me. So not being able to do that is a bit scary.

I never did think of the tax break for daycare either so that is a good point.

As for child care benefits, basically each one goes into the girls RESP accounts. I want to avoid touching that money.

Thanks all,
Adam


----------



## kork (Jun 9, 2012)

adampeps said:


> My wife and I both have good jobs (in my opinion, make more than average for sure) but feel like even at that level there isn't much left over for anything else. I don't have a pension so not being able to save extra on top of my work plan has always been important to me. So not being able to do that is a bit scary.
> 
> I never did think of the tax break for daycare either so that is a good point.
> 
> ...


Perhaps I can share my perception as an "under 40" with a decent job and a stay at home wife with two kids (9 and 6).

My family lives off my full-time income and have for the last 9 years. Our yearly living expenses are about the same as my net salary income.

But I also have my own business and it earns enough to do the following:

We double up our mortgage payments, we max our RRSP's and TFSA's and RESP's. Because we have "extra money" we've recently set up unregistered investments and contribute monthly to those and have managed extensive renovations to our home.

We're pretty active too. Kids are in soccer, violin lessons, downhill skiing, dance lessons, etc. 

So my full-time job pays the bills and all our expenses, but my additional income pays for all the extras. Sortof like a dual income family.

My point is that because you say that you make "better than average for sure money", why not try to figure out a way to pay all expenses with one salary and then all the extra stuff with the other, lower salary? It may just be optics but it may be eye opening?

P.S - While we don't have our kids in daycare anymore because they're both in school, we had them both in daycare 2 days of the week before school to get them used to "being on their own" and not always with mommy or daddy.


----------



## lonewolf (Jun 12, 2012)

adampeps said:


> Oh ya of course, part of our expenses are still contributing to the children's RESPs. I was curious about the daycare in how much we get back from that. Will have to ask a little more about it.
> 
> But again is what I am going through normal? I'm meeting with a retirement advisor in a couple of weeks but until then my anxiety has been sky-rocketing.
> 
> ...


 Let the kids pay for their own schooling your not in the financial position to enable your kids to be dependent in the future. The statistics indicate the odds are in favour of spending money for schooling will be a losers game why promote odds against investing ?


----------



## none (Jan 15, 2013)

lonewolf said:


> Let the kids pay for their own schooling your not in the financial position to enable your kids to be dependent in the future. The statistics indicate the odds are in favour of spending money for schooling will be a losers game why promote odds against investing ?


This post is retarded. It's truth is actually the complete opposite of what you are saying.


----------



## Curiouscreature (Jan 3, 2016)

Here is a bit more information, if you are both making a good double income wage it can be a few thousand $ (depending what you put out). One of the keys is you have to have a care provider that you can claim that deduction from, ie) if you have a nice lady at the end of the street doing it under the table, you wouldn't be able to claim. As well, there are limits on the deduction too. So check that link out.

http://www.taxtips.ca/filing/childcarecosts.htm


If you use tax software you could open up your return from last year and add the kid, and see what happens (remember to add UCCB benefits if you do this).


----------



## lonewolf (Jun 12, 2012)

none said:


> This post is retarded. It's truth is actually the complete opposite of what you are saying.


 Classic reaction to someone that does not recommend an over crowded investment. The increase in debt for the education bubble marches on


----------



## yyz (Aug 11, 2013)

So Lonewolf,
You recommend that all kids do what exactly? At best we end up with a grade 12 educated society in your future world? Ok good luck to you but at least in your society we'll have enough factory workers to make your rose colored glasses.But nobody smart enough to prescribe them for you since we won't have any optometrists.


----------



## Underworld (Aug 26, 2009)

Yea we are paying ~2300 per month for 2 kids in Day Care :S Seems a bit dumb that its "free" when thy get to 5 and start going to school.


----------



## tygrus (Mar 13, 2012)

lonewolf said:


> Classic reaction to someone that does not recommend an over crowded investment. The increase in debt for the education bubble marches on


This is canada not the US. Living at home with a little parent support and maybe a summer job and you get get a degree with out going into debt at all. Education in itself is never a waste provided its useful for your future income or some other pursuit. 

We are going to find in the future more an more high paying technical jobs replaced by automation.


----------



## Just a Guy (Mar 27, 2012)

I think he's pointing out, and studies confirm this, that students who have paid their own way tend to take it more seriously and do better than those who are "given" their education.

If they think they need to pay their own way, they work harder in high school to try to get scholarships, they develop a work ethic (which is sorely missing these days) and appreciate what they earned. They also tend to be more focused, rarely changing majors at a whim, since any wasted courses comes out of their pocket.

personally, I think it's important to teach my kids what I know about investing and running a business. I can tell you that they aren't very interested most of the time but, they are learning and it may be a much better education that they'll ever get anywhere else.

I'd consider myself to be a successful parent if my kids learned about passive income and never HAD to work in their lives. I do, of course, expect them to work...but this way they can do whatever they want and still pay their own way.


----------



## marina628 (Dec 14, 2010)

I have two kids and when we bought our first home it was a semi with basement suite and we only had to pay $160,000 for it .I think that is the first situation which gave us a leg up over a young family now but kids are not in daycare forever and although you cannot save much now if you apply the day care money to savings when this expense stops am sure you will do ok.


----------



## RCB (Jan 11, 2014)

tygrus said:


> This is canada not the US. Living at home with a little parent support and maybe a summer job and you get get a degree with out going into debt at all.


That only works if you live within commuting distance of a college or university, or an institution with the desired program. Great for large centres and heavily populated regions. Not so great for those of us in the rest of the country.


----------



## none (Jan 15, 2013)

Just a Guy said:


> I think he's pointing out, and studies confirm this, that students who have paid their own way tend to take it more seriously and do better than those who are "given" their education.
> 
> .


If you could link to one study that shows this I would appreciate it and also be very surprised. I find it very hard to believe.

I suspect that it's the opposite. If a person is slaving in a coffee shop to pay tuition rather than studying I find it very difficult to believe they would do terribly well. I've taught university courses and I've seen this. Another example of how relatively rich kids get another leg up. I plan to ensure my kid gets this leg up!

To OP. 
SAW THIS on twitter this morning. Admittedly didn't read it. 
http://www.moneysense.ca/planning/how-to-find-and-pay-for-child-care/


----------



## Just a Guy (Mar 27, 2012)

Google is your friend none...a quick search will reveal many links to studies. Just because something doesn't agree with your view of how the world should be, doesn't make it wrong. 

http://www.forbes.com/sites/susanad...kids-to-succeed-dont-pay-for-their-education/


----------



## none (Jan 15, 2013)

I'm on mobile. 

I'll go to the original study when on my local but the article does state that your chances of actually finishing college is better if you are funded. 

You said multiple studies. Got any more?


----------



## Just a Guy (Mar 27, 2012)

Read the whole post...Google is your friend here.

Sorry, I've had 4 kids of my own to spoon feed over the years, time for you to be a big boy now.


----------



## none (Jan 15, 2013)

That's what I thought. 

Very telling.

You need to re read it. It doesn't conclude what you think it concludes.


----------



## Just a Guy (Mar 27, 2012)

I never said that was one of the studies I originally read, I read a lot, I just pulled that up to show you how to do your own reasearch using a tool called Google. Instead of forming opinions bases on your opinion, try doing some research...the studies do exist, sorry I don't have time to read them to you.


----------



## tygrus (Mar 13, 2012)

I can tell everyone in this post that in the future, those who own the assets will be the winners, not those who control the educated labor force because that will be dwindling rapidly. Mundane human tasks will be outsourced to 3rd world countries, high tech and high skilled jobs will be replaced by automation and AI. Your first world education may be eventually useless.

Rather than put so much money into that education, its more prudent to own the factors of production in the new economy.


----------



## none (Jan 15, 2013)

Just a Guy said:


> ..the studies do exist, sorry I don't have time to read them .....


Obviously.


----------



## tygrus (Mar 13, 2012)

none said:


> Obviously.


The old days are gone where you could just work hard and rocket ahead, so whatever incentive you think there is in paying for ones education on your own is negated by that fact.

The new paradigm of getting ahead will be giving the next generation a leg up financially, like the 1% have been doing for 1000 years.


----------



## none (Jan 15, 2013)

tygrus said:


> The new paradigm of getting ahead will be giving the next generation a leg up financially, like the 1% have been doing for 1000 years.


Of course - best predictor of financial success in whether you were born with it.

That's why I hope that my kid will have ~100K in his RESP when he's ready to go. Financing your kids undergrad education is on par with funding highschool back in boomer times. Of course, most boomers don't realize this.


----------



## lonewolf (Jun 12, 2012)

There have been a lot of cases where people have won big money in the lottery & have just blew the money. Paying for kids education is counter productive in teaching your kids how to stretch a dollar as well as to be creative on how to earn a dollar.


----------



## lonewolf (Jun 12, 2012)

adampeps

Make a list of all money spent over next 6 months. Beside each money spent rate using a scale of 0-5 rate how much value the money spent added to your life. For example if I spent 10 dallars @ a grocery store for fruit & vegatables I would give it a 5 because I value health & vitality & if I smoked I would put buying a pack of smokes a 0 because it never added value to my life in fact I would probably give it a negative reading. Then beside each expense indicate if in the future if you want to spend more or less on the expense in the future or the same. The rating system can also be used with the earning of money. Then with the data form a budget. Could even chart your progress of savings & place chart on fridge or where ever for easy viewing. A chart of passive income could also be charted with the savings along with chart of expenses. Goal most will try for would be to get passive income above expenses.


----------



## CPA Candidate (Dec 15, 2013)

Between the tax deduction (in my case 34.75% of daycare) and the $160/month in taxable child benefit income, I only pay for about half the cost of daycare. Daycare is one of the best tax shields around.


----------



## lonewolf (Jun 12, 2012)

losers make excuses, winners get the job done. If you really want to save you will figure it out & stop making excuses.


----------

