TLDR
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Parental leave is an exciting time, but the reduced income can cause stress if you’re not prepared.
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Make a budget that reflects the new income realities and added expenses of parental leave and find new low-cost and free activities to enjoy.
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Understand the different options available for employment insurance and how to apply for them.
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Reassess your budget when it’s time to go back to work. You will need to adjust it based on new expenses and savings options for your child.
Welcoming a child into your family and planning a parental leave can bring mixed feelings of both excitement and anxiety. Make your parental leave finances work for you with these six money tips.
How to budget for parental leave
If you take the time to make a plan for a reduced income, you can devote your full attention to where it matters most during those first weeks with your family.
1. Calculate your income
Calculate your current take-home pay: This number (after deductions) will serve as a baseline to compare your estimated income against so you can budget accurately.
Calculate current monthly expenses: This will give you a good idea of where you’re spending. Include mortgage or rent; public transportation or vehicle loan, gas and maintenance; health care; utilities, streaming services; food; entertainment; outstanding credit card balances; gym memberships; household purchases; and anything else you can think of. Don’t forget annual bills. Divide by 12 to get a monthly number.
Track essential vs. non-essential expenses: Ensuring stable finances during parental leave might mean unloading some expenses. Which of your expenses are non-essentials that you could forgo during parental leave when your income is lower?
Estimate your new household income: Your estimated income will depend on how much you earn before the leave and on whether you select the standard or extended benefit options of employment insurance (EI). Read on for details.
Pro tip: Give your new budget a test drive. Before your leave starts, try living on your reduced income for a month. This can show you where you could tighten or let out the belt a little.
2. Understand government and employer benefits
To help cover expenses during parental leave, the government of Canada provides EI benefits to prospective parents and your employee may offer a top-up program. Here is a breakdown.
EI parental leave benefits in Canada: Maternity leave financial benefits are available to people who are away from work because they are pregnant or have recently given birth. This covers up to 15 weeks of maternity benefits, at 55% of your earnings up to a maximum of $695 a week, as of February 2025.
That can be followed by parental benefits. These are available to any parent of a newborn or newly adopted child. You’ll have to choose between standard and extended benefit options. Standard parental leave has to be taken within 52 weeks and also covers 55% of your pay up to $695. The extended benefits option is taken within 78 weeks. This covers 33% of your pay up to $417 a week. For each option, you don’t have to take the weeks consecutively, but you do have to do it within those time frames.
This EI benefits tool can help you calculate an estimate of your potential weekly benefit rate and how long you might receive benefits. Just answer a few questions and it will guide you through next steps, such as when and where to apply.
Employer top-ups: Some employers make it easier for new parents to budget by offering top-ups, which are supplemental unemployment benefit plans (SUBPs) to bring your earnings closer to your actual salary during parental leave. Check with your employer to see what benefits are available to you.
3. Build a baby budget
Create a budget for your new family member’s first year. Estimates of most of these expenses are readily available, from gear, clothing and food to supplies and health care.
Anticipated costs: When you bring your child home for the first time, you’ll need to have some gear on hand: a car seat, crib, stroller, high chair and robust supply of diapers. Some of these items will need to be swapped out as your child grows, so it’s important to budget for your initial expenses and the next stage. Expect to spend from $500 to $1,000 a year on diapers alone.
Smart saving on essentials
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Babies outgrow their clothes and gear in no time! You’ll find great deals on social media marketplaces and local clothing swaps parents organize.
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Public health clinics offer free immunizations and development check-ins.
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Don’t forget the library for free access to parenting books, kids’ music and even baby activity kits.
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Batch cook food for easy meals so you’re not tempted to order takeout when you’re tired. Food delivery can quickly eat away at a budget. Make grocery lists and stick to them when you’re in the store.
4. Cut costs while still enjoying parental leave
There are plenty of ways to save money with a new baby and savor this family-focused time without breaking the bank. Read on for tips on easing your parental leave finances.
Free and low-cost family activities: Get together with friends or join meetups with other parents in a similar stage of family life. Seek out inexpensive entertainment, like the farmers market, the zoo or a picnic in a quiet park.
You might feel extra stressed during this transition time, so choose restorative activities when you can: If you have the energy, get outdoors—in nature if possible. Even a brief stroll for a breath of fresh air in the park can reset your cortisol levels. And don’t forget: Naps are free. Grab them when you can.
Buy secondhand or swap with other parents: Buying second-hand car seats and crib mattresses is generally not recommended. But there are many high-quality resale strollers, chairs and swings in consignment shops and online selling at a fraction of the original price.
5. Tap into financial tools and supports
Take advantage of online tools that can help you track and plan your income and expenses when you’re expecting a drop of income during parental leave.
RBC budgeting apps and calculators: RBC offers online and mobile tools that can help with budgeting and give you a clear view of your finances. With the NOMI app, you can analyze your cash flow and make it easier to save. The app can produce a budget based on your unique spending habits and help keep you on track with updates and reminders. At RBC’s My Money Matters, you can find articles packed with tips on budgeting, as well as navigating the financial aspects of parenthood.
No-fee accounts for families: RBC Leo’s Young Savers Account is a great way to begin your child’s savings. This is a starter bank account for newborns up to age 12. With no monthly fee or minimum balance, plus free debit transactions and transfers, it’s an easy way to build your child’s nest egg.
6. Plan for your return to work
Preparing for and going through parental leave is an enormous job. But a bigger shift could be coming, when your income returns to pre-leave levels and your expenses shift. Before you head back to work, you’ll want to align your budget with your new financial reality. Here are some tips to get you started.
Rebalancing your budget: Take a close look at your expenses during leave and compare them to the expenses you had before leave. How have they shifted? Have your priorities changed so that essential expenses look different now? Where will spending increase, and how much can your full paycheque cover?
Adjusting savings and child care expenses: Explore child care options well before you go on leave if you will be needing it when you return to work. If child care costs are prohibitive, do you have family who can provide care some of the time? Consider sharing babysitting with another family, or hiring a nanny, which could be more affordable if you have two or more children.
Paying for childcare will be a big expense, and budgeting for it is crucial. Childcare in Canada costs approximately $8,000 a year for children ages 3 and under, or $32 a day. Some good news: The government is building a nationwide Early Learning and Child Care system to give all families access to quality care. The goal is to bring childcare fees down to $10 a day by 2026.
Decide how much you want to allocate to savings as well. Keep in mind you may want to open a registered education savings plan (RESP), a tax-sheltered plan to put money away for your child’s post-secondary education. And if you paused savings or retirement contributions during parental leave, can you return to your previous levels to restore momentum?
FAQs: Common questions on how to financially prepare for a parental leave
To budget for parental leave, calculate your current take-home pay, estimate your reduce income with EI benefits and track your monthly expenses. Focus on essentials and cut back on non-essentials to stay on track.
EI parental leave benefits provide up to 55% of your earnings (to a maximum of $695 per week) for standard leave, or 33% (to a maximum of $417 per week) for extended leave. Parents can share benefits, but the total number of weeks is capped.
Expect costs for diapers, clothing, food, childcare, items such as a car seat, stroller and so on, plus any health-related expenses. Planning ahead for these essentials will help avoid financial stress.
You can save money by buying second-hand baby items, borrowing books and activity kits from the library and choosing free or low-cost family activities.
Financing parental leave
Raising a child is a big financial responsibility. Supporting your growing family by establishing a plan to cover expenses during parental leave is smart. You’ll create an experience that sets your foundation for years to come.
Make sure you’re ready for parental leave in all the ways that matter.
Book an appointment with an RBC advisor. We’re always available to help.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.
