Elisa and Dave Santiago bought a two-bedroom condo with a den in a trendy neighbourhood in uptown Toronto in 2009 with plans to eventually start a family. Then they found out they were pregnant—with twins. When daughters Micah and Yuna arrived eight weeks ago, the joy of becoming new parents clashed with the new reality of what it meant to raise a family in a high-cost city.
As a self-employed naturopath, Elisa, 35, wasn’t eligible for maternity-leave benefits. Dave, 36, had recently left his well-paying accounting job to start his own consulting business, leaving the couple with little in the way of a steady income in the short term. So, four years after they purchased their dream home, the couple put their condo up for sale and moved back in with Elisa’s parents. While Elisa says the decision was largely driven by her need for her mother’s help in raising newborn twins—a huge benefit in a city where daycare costs can reach $2,000 a month per child—the nearly $3,000 a month in mortgage payments and maintenance fees meant their condo had started to look less like a family home and more like a financial burden. “It’s hard to let go of that condo, because I love it,” Elisa says. “But this is the choice we had.”
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The Santiagos are only now discovering what nearly six million Canadian families with dependant children know all too well: The cost of rasing a child has hit astonishing new heights. In a society where many parents see buying a house as an important part of starting a family, the cost of housing in cities is rising into the stratosphere, pushing double-income households to the brink. Daycare costs, meanwhile, are now equal to taking on a second mortgage in some regions. The hourly rates of nannies and babysitters are also going up by double digits. Plus, the pressure to save for children’s education is higher than ever, as tuition fees continue to climb. It’s no surprise that parents of young children, says Statistics Canada, now carry debt worth 180 per cent of their after-tax income, well above the already-elevated national average of 161 per cent. Bundles of joy, maybe, but babies have also become financial burdens from which today’s parents may never recover.
Exactly how much it costs to raise a child is the subject of much debate. A Fraser Institute study last month pegged it at $3,000 to $4,000 a year—or $72,000 to raise a child to 18. It’s a figure that excludes both housing and child care costs, emphasizes scrimping and saving, government child benefits and borrowing from family or friends. Meanwhile, an analysis by MoneySense in 2011 estimated it would cost considerably more: $243,660, or close to the $241,080 calculated by the U.S. Department of Agriculture.
Yet even such huge figures are “woefully insufficient,” says John Ward, a Kansas economist who consults on economic damages for legal disputes, including wrongful death cases involving children. For one thing, Ward says, most of these analyses do not take into account societal costs, such as the property taxes all homeowners pay to support public education. While they do take into account some of the added housing costs associated with growing families, they don’t include a host of other expenses, such as the cost of saving for a university education. Tuition is expected to reach close to $40,000 for a four-year degree in Canada by the time today’s infant heads off to university—or as much as $110,000, including the cost of textbooks and accommodation. Add to this the opportunity costs of raising children: the investment returns that parents could have earned if they had taken the money they spent on kids and saved it instead—at five per cent interest, that comes out to roughly $280,000—and the lost income from having one parent take time off work to care for a child. “If mom was a lawyer and dropped out of the labour force for four or five years, the family gave up the opportunity cost of maybe $60,000 to $100,000 a year in order to bring that child to a point where he could enter the education system,” says Ward. Statistics Canada estimates that even mothers who work full-time stand to earn 12 per cent less over their careers than women who have never had children, a “motherhood penalty” equal to roughly $108,000 over 18 years on a $50,000 salary.
Ward pegs the all-in cost of raising a child to 18 in the U.S. at around $700,000, or closer to $900,000 to age 22, which is a more realistic picture for today’s families. The calculations work out similarly in Canada, where the total cost of raising a child to 18, including lost income, forgone investment savings and the price of a college education, comes out to around $670,000. For those dreaming of two children, that’s likely to cost well over $1 million.
It shouldn’t be a shock, then, that young parents are the most financially squeezed of any families in the country. Statistics Canada estimates that couples with children account for 30 per cent of households, but more than half of all of Canada’s household debt. Two-parent families with children under the age of 24 averaged $157,000 in debt, or $33,000 more than couples without children.
By far the largest sticker shock that new parents face comes from child care costs, which run from Quebec’s subsidized $7-a-day child care centres, equal to around $140 a month, to as much as $2,000 a month in major cities. Toronto screenwriter Trevor Finn caused a heated debate last month when he wrote in the Globe and Mail that he and his wife earned a combined six-figure income and couldn’t afford both the $1,600 a month in daycare and their small downtown condo.
The Vanier Institute of the Family says that, on average, it costs the typical Canadian family $1,000 to $1,200 a month to put a two-year-old in full-time daycare, or the equivalent to paying the principal on a $360,000 house over the life of a typical 25-year mortgage. “Child care costs are, in some cases, the same as you pay in rent,” says Nora Spinks, the institute’s CEO. “For many families, it is on the borderline of affordability.”
That’s if parents can find a daycare spot at all. It’s not uncommon for wait lists for licensed child care to stretch more than a year. The Vanier Institute estimates there are regulated child care spaces for just 22 per cent of Canadian children under the age of six. That lack of affordable options has led to a booming market for nannies and babysitters. Between 1998 and 2012, the number of people employed in child care in Canada jumped 65 per cent, from 20,800 to 34,400, compared to overall job growth of just 28 per cent for the entire economy, according to Statistics Canada data. Wages in the sector have nearly doubled, from an average of $6.87 an hour to $11.74, growth that has outpaced both inflation and the average wage growth across Canada. According to CanadianNanny.ca, the minimum wage for live-in domestic help averages out to $19,000-$21,000 a year, not including room and board.