Your client just had twins, now what?

Couples usually plan to have one child at a time, but in-vitro fertilization (IVF) is becoming increasing common with urban clients aged 35 and up, which increases the chances of twins and triplets.

Kelly Ho, a partner at DLD Financial in Vancouver, has clients with twins and large families. While first-time parents having multiples don’t typically choose to have more kids, those who already have one child and want more might end up with multiples on their second try.

“I have a few sets of twins within my clientele,” Ho said. “[In one] case it was IVF, so they knew there was going to be a chance that they were going to have twins.”

When clients find out they’re joining the minivan mafia, experts recommend balancing childcare spending with retirement needs, reevaluating insurance requirements and considering the long-term implications of one parent staying home.

Childcare vs. retirement

Couples may plan to have children, but might not have a specific “diaper fund,” said Scott Sather, president and financial planner at Awaken Wealth Management in Regina. Once they know how many children they are expecting at the beginning of the pregnancy, the planning exercise should include reallocating budgets and reprioritizing goals.

Children’s expenses and retirement savings become competing priorities with limited cash flow, so clients need to be strategic with how they save, said Gabriel Leclerc, a financial advisor with Edward Jones in Arnprior, Ont. Leclerc had, at one point, four children under his roof.

For example, if the client has a matching pension or group retirement savings program, those should be maximized first as the matches are on a “use it or lose it” basis, Leclerc said. On the other hand, RESP grant money can be caught up later.

It’s also about looking at longer term needs, Ho said. The first five years of childcare costs are typically high, running into the thousands every month for daycare or nannies for those with three children. But costs come down when they start attending primary school.

For the first few years, it could make sense for clients to focus more on growing their emergency fund via a TFSA instead of their retirement savings for more flexibility, said Sather, who has two children and two grandchildren.

As living gifts become more common with older clients, grandparents can consider providing gifts to grandchildren’s RESPs, Leclerc said. “I do family meetings with our clients and the other generations on how to best utilize those gifts so that the grandparents feel that the funds they’ve provided have not just been used to buy a car or go to Disney, but to something substantial that they feel good about.”

Grandparents can also be a great resource for childcare in those early years to reduce the financial strain on parents, Sather said. Especially as it can be difficult to find a nanny willing to care for twins or triplets.

Insurance needs

Some immediate costs don’t scale proportionally to the number of children. For example, clients may need a larger home or a new family car.

As financial commitments increase, Ho reviews clients’ insurance needs to ensure the remaining spouse can support the children and debt payments in case of death.

In addition, insurance is cheapest at 15 days old, so parents can consider buying a whole life policy for a child to put away tax-sheltered savings, Ho said. Parents can transfer insurance policies to their kids tax-free in most cases, and the policy could have enough savings to offset premiums by then.

To work or not to work?

Multiple provinces offer $10-a-day daycare facilities, but space is so limited that getting all your children in would feel like winning the lottery, Ho said. Without it, costs can climb above $1,000 a month per child in Vancouver, even after the provincial fee reduction.

Apart from looking at whether a second income will cover childcare costs, clients should consider the future earnings impact of putting a career on hold, Leclerc said. Career progression, Canada Pension Plan amounts and pension plan eligibility all depend on years of service.

“Even if the net benefit of going to work today is small, you’re still giving up some … income in the future,” Leclerc said. “Are you going to continue to contribute into the pension plan while you’re on parental leave? And how do you plan on buying back pension years after you go back to work?”

As for tax, advisors can show clients the net tax impact of giving up one income using financial planning software. For example, parents get additional tax credits and can deduct daycare costs from the lower income earner, Leclerc added.

Sather’s family didn’t even reach 10% savings in the early years after having two young children. But there’s more to all of this than money.

“Do I look back now and say, ‘Darn, I wish we would’ve put more money into the savings account?’ Nah man, it doesn’t matter … there’s some grace that needs to be given,” Sather said. “If you you’re working 35, 40 hours a week, that’s time that someone else is spending with your child instead of you. That’s got to be part of the equation.”