Congratulations! A little bundle of joy soon will, or just has, entered your life and stuck an adorable hand in your wallet.
Babies are expensive – I should know. My family has grown by two members in the last five years. Diapers aren’t the half of it. They’re not even a fraction. Every big financial decision in that time – from where we live, to what car we drive, to where we shop for groceries – has been made with the kids in mind.
When you’re a new parent, many giant expenses are simply non-optional. Armed with the right credit card strategy, however, you can make hay while the sun shines.
Consider a cash back credit card
If you’re a new parent, there’s a good chance you’ll put travelling on hold for a while (at least, until the little one gets bigger). So, instead of racking up points or miles to save for a far-flung vacation, you might want to think about equipping yourself with a cash back credit card. With cash back, your rewards can help you save on anything you charge to your card (including diapers and baby food). Certain cards, like the Tangerine Money-Back, even redeem your cash back monthly rather than just once a year so you can dip into your rewards sooner.
According to CPA Canada, families spend between $10,000 and $15,000 per year for each of their children. With that kind of spending, you can earn credit card rewards of $250 per year or more if you have the right card for making purchases you would have anyway.
Look at your credit card bonus categories
You’ll also want to select a credit card that rewards the right spending categories. For example, the TD CashBack Visa Infinite pays 3% cash back on bills, groceries, and gas but only 1% cash back on other purchases. Those categories work well for my family with grocery receipts a mile long, but aren’t optimized for parents of an infant making a weekly excursion to Babies-R-Us.
By contrast, the SimplyCash Preferred Card from American Express pays 2% cash back on all purchases, making it one of the best choices for general expenses.
You may find that carrying a combination of two credit cards, and using each for its best purpose (i.e. using one card for groceries and another for baby toys), is the best strategy for you.
Know when a low interest card makes sense
If you can’t pay off your credit card in full every month without fail or the surge of baby expenses has you worried about climbing bills, skip the rewards and consider a low-interest credit card instead. These cards have a fraction of the interest rates found on most standard credit cards, which means you’ll owe less in interest if you do need some financial wiggle room to pay back your balance over a longer period of time.
Store credit cards can help too
Store credit cards can be great, if the store matches up with your new human’s relentless supply of unreasonable demands. PC Financial Mastercards offer bonus points at Shoppers Drug Mart and Loblaws banner stores, and is good for saving on groceries, baby food and diapers. The Triangle Mastercard from Canadian Tire is another great store card that pays 4% in Canadian Tire Money on purchases at the department store chain, which can come in handy when your infant becomes mobile and buying baby gates suddenly becomes your top priority. You can also take advantage of the card’s no-fee financing to help you more easily manage paying for big ticket items like a baby stroller or crib over one or two years instead of at the end of your card’s monthly billing cycle.
Take advantage of authorized users
Joint credit cards aren’t really a thing in Canada, but most cards allow you to add your partner as an authorized user. This allows them to pick up a second card that’s linked to your card’s credit limit and use it to make purchases. It also means they’ll rack up rewards on your account, helping you pool rewards and earn faster even when you’re not there to swipe your own card.
Many cards charge a small fee for each authorized user, but it’s typically far less than the annual fee on a separate premium credit card. If paying for an authorized user doesn’t excite you, the SimplyCash Preferred Card from American Express is one of the best cash back cards in Canada and allows you to add your partner for no extra cost. The MBNA Rewards World Elite is another premium card that costs nothing to add authorized users (and even made our list of the best credit cards to use at Costco).
Other spending tips for new parents
PC Insiders: If you’re a PC Optimum points collector or do a lot of shopping at PC stores like Loblaws and Shoppers Drug Mart, you’ll want to consider signing up for PC Insiders. This subscription service will earn you 200 PC Points per dollar on virtually all brands of diapers and baby formula (among other purchases). Since 10 PC points are worth about $0.01 when redeemed at PC stores, that’s like earning $0.2 back per dollar (a 20% return) on two of the most essential, costly, and common baby expenses. While the subscription isn’t free (it’s $99 per year) considering formula and diapers can set you back $50 per week, you can stand to save several hundred dollars annually.
Use the right apps: As a parent, you’ll have less time to comparison shop and hunt for discounts. A handful of money-saving apps and websites make it easy – with some helping you shop for grocery coupons or earn additional cash back on items just by swiping your finger.
Make every cent count: With a little one, you’ll want to maximize your savings every way you can. Financial tools like Wealthsimple and its Roundup feature can help in a small but impactful way. Roundup will automatically round your debit or credit card spending to the nearest dollar and invest the spare change into either a savings or investment account. That’s an extra $0.50 tucked away on your $1.50 coffee or $9.50 paper towels. With WealthSimple Roundup, you easily can rack up an extra $10 per week and $500 annually.
Set up the right savings account: Whether you’re saving up for future daycare or just want to build up an emergency fund, you’ll want to establish short-term savings that you can access at any time without worrying about dips in the stock market. Some of the best savings accounts in Canada offer up to 2.45% – beating out what many of the big banks offer.
Get some sleep: Seriously. People make mistakes when they’re tired, and nobody is more tired than the parents of a new baby. With credit cards, mistakes can come in the form of making impulsive purchases, forgetting to make payments, letting balances run too high, and not communicating honestly and often with your partner about how the two of you are managing your spending and credit.
Take care of yourself and get some sleep when you can. You’ll feel better and make smarter decisions while you’re at it.
The bottom line
As a new parent, your spending is going to go cuckoo for some time. Make the best of the situation by choosing the best credit card for your needs.
If you pay off your balance each month, this may be the right time to upgrade to a rewards credit card. Make the most of it by choosing the right kind of rewards, looking for credit cards that reward the purchases you’re most likely to make, and adding your partner as an authorized user so you can both use the card to earn points. If you spend like an average new parent, you could earn around $250 per year in rewards for making the same purchases you would have made with your debit card.
Go forth and multiply, and multiply your rewards while you’re at it.