A lot of B.C. families are having to make big financial tradeoffs to raise kids
A new study on B.C. families’ finances has some grim findings on the reality of raising children.
According to a survey from Wealthsimple, over half of B.C. couples with kids said that cost-of-living pressures have caused them to make financial tradeoffs, with 35 per cent struggling to plan due to rising costs.
Wealthsimple conducted the survey between April 1 and 20, asking over 1,700 Canadians about the state of their personal and household finances, as well as their overall outlook on their financial futures.
“I think for the average family now it’s more complicated than ever. A lot of people are juggling two careers, trying to raise kids,” said Emily Luk, who leads the family and money management product teams at Wealthsimple.
For example, she pointed out that housing prices are outpacing salaries. In Vancouver, the housing cost is reaching what Desjardins has called “impossibly unaffordable,” since homes are at least nine times higher than household incomes. Meanwhile, Statistics Canada reported in 2023 that it costs $293,000 from birth to age 17 ($17,235 per year) to raise a child in Canada.
“What we’re seeing for a lot of couples, too, is that they’re increasingly needing to make these trade-off decisions … having that language of, ‘Is this a need or a want?'” Luk continued. “Because there is just less money that is left over at the end of the day.”
The survey found that people’s retirement and long-term savings are “taking a hit.” Among the B.C. couples with kids who have had to make tradeoffs, 55 per cent of them have reduced or paused investing, 54 per cent have reduced or paused saving, and 39 per cent have reduced contributions to retirement savings.
True North Mortgage conducted a survey earlier this year that had similar findings. B.C. mortgage holders reported making sacrifices to keep up with their mortgage payments: over 40 per cent delayed or avoided vacations, one-third avoided home repairs or renovations, and 33 per cent delayed or avoided retirement savings or investments.
According to the Wealthsimple findings, “the strain shows up at home,” with over 80 per cent of B.C. couples with kids reporting that finances have caused tension or conflict.
What’s the long-term impact?
Luk said that if people aren’t investing their money each month, it means they are missing out on some of the “power of compounding.”
“Having money in the market for longer makes a really big difference in terms of your long-term retirement, as well as any long-term plans you have,” she explained.
“Some people who are making these trade-off decisions, like, ‘hey, do we buy the thing we really need right now to support our family or to support our kids,’ instead of investing. These small decisions really do add up, and I would almost think of it as death by a thousand paper cuts,” she said.
“It’s very rarely one big decision that is going to take you off track, but it’s how all these things add up together, and then you might realize that you know down the road — when you’re thinking of retirement — you’re in a materially different place, because you weren’t able to save an additional $1,000 or $2,000 a month.”
Luk said this is important because of the concept of compound interest. For example, if you invest $100, and it grows 10 per cent a year, it will grow to $110 over the next 12 months.
“If it grows 10 per cent again, instead of just growing $10, it grows $11,” she said. “When you start to play that out over 10 years, 20 years, 30 years, that’s really where a small amount of money can grow three, four, or five times.”