This article chronicles the dilemma facing Mike and Melissa. They want to have two kids, but after the birth of their first they realize that nurturing a child is highly expensive. This lesson plan lays out the costs associated with raising a child, and explains why many Canadians believe they cannot afford to raise as many children as they want.

Getting Started

Appropriate Subject Area(s):

Personal finance, financial literacy, family planning.

Key Questions to Explore:

  • Why are Canadians too cash-strapped to raise children? (stagnating incomes, higher costs of living)
  • What steps can Canadian families take to efficiently manage their finances?
  • What effects could low birth rates have on the Canadian economy and society at large?
  • What steps are the Canadian government currently taking to ease the financial burden of child care costs? What additional steps can the Canadian government take?
  • Are there any benefits to a lower birth rate?

New Terminology:

Discretionary income, mortgage, standard of living.

  • Discretionary income is the amount of an individual’s income that is left for spending, investing or saving after paying taxes and paying for personal necessities, such as food, shelter and clothing. Discretionary income includes money spent on luxury items, vacations and nonessential goods and services.
  • Standard of living: a standard of living is the level of wealth, comfort, material goods and necessities available to a certain socio-economic class or a certain geographic area. The standard of living includes factors such as income, gross domestic product, national economic growth, economic and political stability, political and religious freedom, environmental quality, climate, and safety. The standard of living is closely related to quality of life.

Materials Needed:

A copy of the article.

Study and Discussion Activity

Introduction to lesson and task:

A significant portion of working Canadians are faced with rising costs of living and stagnant or declining incomes. The article states that this is discouraging couples from raising children (or as many as they would want) because they either cannot afford to do so or because doing so will significantly reduce their standard of living.

If Canada’s birth rate continues to drop, eventually we would be faced with a shrinking labour force. That would negatively impact the Canadian economy because there would be less economic growth (case in point: Japan). Furthermore, it could jeopardize Canada’s social security net, as there would be fewer people paying income taxes.

It is not a coincidence that the debt-to-disposable-income ratio is at record levels. As stated in this article, Canadians are facing stagnating incomes and rising costs of living. It appears that most families are directly or indirectly turning to debt to finance their lives. This could have bad ramifications when interest rates inevitably rise.

To the credit of the Canadian government, it recently announced a $500 million budget to create an affordable, high-quality, flexible and fully inclusive child care program. This could help alleviate a portion of the financial burden of being a parent.

Given the rising cost of living and the relatively lower incomes in Canada today, financial literacy has become even more important. It is important to teach students how to number-crunch, like Mike Neudorf and Melissa, to determine which financial responsibilities they can afford to undertake. Such numeracy skills will enable students make sound financial decisions.

Action (lesson plan and task):


  • Ask your students to explain why Canadians lack sufficient funds to raise children.
  • Ask your students to state the negative macroeconomic effects falling infancy rates will have in the long run.
  • Ask your students to offer some solutions to this problem. (Hint: the government could increase the following tax credits for parents/guardians: child disability benefit, universal child care benefit, child care expense deduction, family caregiver amount, children’s fitness tax credit, adoption expense etc.)
  • Ask your students to state the potential negative effects of raising a child or children without sufficient funds.
  • Ask your students to state some positive effects of a reduction in birth rates in Canada. (Hint: reduction in pollution and global warming, due to a reduction in consumption and production.)


  • According to the personal finance website MoneySense the annual cost of raising a child in Canada is $13,366. However, this figure is the average annual cost of raising a child from cradle to 18 years of age.
  • It is important to teach your students how to make sound financial decisions. Numeracy skills are very important when making a financial decision. In this article, Mike and Melissa “number-crunched” to decide whether they could afford to raise another kid or not.
  • Walk your students through how to effectively budget and ascertain whether they can afford to undertake a given financial responsibility.
  • Ask your students to state the steps they would take, if they were in Mike and Melissa’s position, to ascertain whether they could afford to raise a child.

Sample solution.

(1. Estimate the annual cost of having a child. 2. Identify the annual cashflow available after subtracting current expenditure from total income 3. Assess ability to afford the total cost, given annual unused cashflow and the total annual costs to raise a child. Develop a realistic financial plan.)

Walk your students through a sample breakdown of this number crunching exercise:

  • Estimating the total cost of raising a child.

Cost of raising a child in Canada

Category Cost
Food  $     1,799.94
Increased household costs  $    2,834.88
Child care costs  $     4,141.84
Clothing  $       874.44
Increased transportation costs  $     2,152.22
Health Care  $       255.35
Personal care  $       260.56
Recreation/school supplies  $    1,046.40
TOTAL COST TO AGE 18 (0-18)  $253,946.97


  • Note: This estimate is based on MoneySense’s 2014 numbers, and it only shows the average cost over 18 years. In reality, the cost of raising a child tends to be higher in the early years (0-5).
  • Identifying available cash flow to cover annual child care expenses: This is an estimate that can be derived by subtracting current expenditures from total annual household income.
  • Assess ability to cover the annual costs of raising a child: During this stage, families may add several assumptions to their annual cash flow calculations. For example, if a family member believes they could increase their income by taking on additional job, their cost assessment should reflect this assumption; or if this family could cut several discretionary costs, their cost assessment should also reflect this.
  • After taking all these assumptions into account, if a deficit still exists between the discretionary funds available to a family and the annual cost of raising a child, this indicates that this family is financially unable to afford having a child at the moment.
  • Developing a plan: After completing the first three steps above, if a family decides that it has enough disposable income to raise a child, it will be important to develop short- and long-term budgets to plan and monitor their finances and allocate their funds effectively so that their children will be well taken care of.

Consolidation of Learning:

  • Ask your students to develop a 5-year budget for a young couple who are expecting a child in six months, and currently earning an annual household income of $100,000 and incurring annual expenditures of $70,000.

Success and Additional Learning

Success Criteria:

  • After reading this article students should understand the level of financial analysis required in building and maintaining a family.

Confirming Activity:

  • Ask students to state why numeracy skills are important in personal finance decision making.