Bill had barely passed his 28th birthday when he was severely injured in a debilitating accident. After recuperating from operations on his back and eyes he was still left with spinal damage, partial paralysis in one leg and partial blindness in one eye.
He found it difficult to walk, stand, or sit for extended periods of time. Needless to say, this made it challenging to secure any type of long-term employment at a time when he had a young family.
Disability Insurance
Many wage earners are diligent in purchasing life insurance to protect their families in the event of their early death, but many do not consider disability insurance.
Related: Understanding Disability Insurance
The fact is that people under 50 are more likely to become disabled than die – almost 35% will suffer a long term illness or disability lasting longer than 3 months.
People don’t buy disability insurance for a number of reasons, mainly because it can be quite expensive and they believe they have sufficient coverage through their workplace or government benefits – but do they?
Workers Compensation
Workers compensation covers only work related injuries. It’s most often associated with industrial accidents but also covers other workplaces – the retail worker who falls off a ladder, or the office worker who puts out her back moving the photo copier to get at a paper jam.
It pays 90% of lost income and covers health costs associated with the injury until you’re no longer disabled, or your condition becomes stable.
Related: No Medical Exam Life Insurance
For those with a permanent injury, payments will be recalculated and either paid monthly or a one-time lump sum may be offered.
Employers’ Group Benefits
Employers can opt out of WCB if they offer disability insurance to their employees. Very few people actually know how and what their group disability insurance covers. Many don’t look beyond their short-term paid sick leave when they have the flu.
The coverage may be limited. You may receive up to 70% of your regular salary – other monetary perks and bonuses are not included.
Related: Time To Revisit Your Employer Sponsored Pension Plan
One of the main concerns is the definition of disability. Generally an employee will be covered for up to two years if unable to perform their own occupation, but if there is the ability to perform an alternate job in the company they will no longer be eligible for benefits.
Canada Pension Plan
The CPP disability benefit is available to people who have made enough contributions to the CPP and whose disability prevents them from working at any job on a regular basis. The disability must be long lasting.
You may earn up to $5,000 (in 2012) and participate in a trial work period for up to three months and still receive benefits. The trial allows you time to test your ability to work on a regular basis.
Related: How To Determine Your CPP Benefits
Private Disability Insurance
Private disability insurance plans can be tailored to your requirements. The more benefits and broader the terms, the higher the premiums. It’s worthwhile to calculate the exact level of protection that you need and where you are able to cut some of the costs.
Some terms to look at are the waiting (or elimination) period before you start receiving payments, own occupation or any occupation, cost of living adjustments, length of term (can be up to 65 years of age but shorter terms are more affordable, with 5 years being common).
Final Thoughts
Your earning potential is your most valuable asset and you need to protect it. Accidents and illness can happen at any time.
How devastating it would be for boomers, who have worked hard all their life, to lose everything because they were not properly covered?
Related: Why Baby Boomers Aren’t Prepared For Retirement
Parents, especially if single, need a back-up plan to protect their earnings. Contract workers and the self-employed need to ensure their future income.
Keep in mind that you can’t piggy-back payments. They have a maximum total regardless of how many sources you use. Most programs will expect you to eventually take on some type of employment if you are able to perform the work – hopefully it will be better than a cashier at McDonald’s.
The above story is true. The name has been changed, but it is my husband.
I urge you to investigate all your sources of replacement income and be prepared. We definitely were not.
It’s nice to get cash back rewards on your credit card spending, but the top cash back credit cards come with an annual fee that can take a bite out of your earnings. If you’re not a big spender, the best option is a no-fee cash back credit card.
Best No-Fee Cash Back Credit Cards
You can still earn big rewards with a no-fee card. I used the MBNA Smart Cash card for over a year, and collected $700 in cash back.
With this no-fee cash back credit card, you’ll get 5% back on groceries and gas for the first 6 months, and 2% back thereafter. You’ll also get 1% back on all your other purchases, including recurring bill payments.
RBC’s Cash Back MasterCard pays 2 percent back on up to $6,000 of grocery spending per year, plus up to 1 percent back on everything else.
Capital One’s Aspire Cash Platinum card is also worth a look. With 1 percent back on all your spending, and no limit on how much cash back you can earn.
Unfortunately, Capital One discontinued its Aspire Cash World card, which paid cardholders 1.5 percent back.
To find the best credit cards, you need to figure out how much money you spend on average each month. Some annual fee credit cards offer juicy rewards, but unless you have a high income and spend more than $2,000 per month on your card, you’re probably better off with a no-fee rewards credit card.
Related: Best Credit Cards For Travel Rewards
No-Fee Cash Back Credit Card Comparison
I took a look at the best cash back credit cards with no annual fee, and compared them based on spending $1,000 per month and $2,000 per month to see which one came out on top.
I also looked at how much cash back you’ll earn after using the card for three years to balance out the cards that pay big bonuses in the first year.
| Credit Card | Annual Cash back $1,000/month* | After 3-years | Annual Cash back $2,000/month** | After 3-years |
| MBNA Smart Cash | $240 | $576 | $270 | $666 |
| RBC Cash Back | $138 | $414 | $270 | $810 |
| Capital One Aspire Cash | $120 | $360 | $240 | $720 |
| PC MasterCard | $120 | $360 | $240 | $720 |
| TD Rebate Rewards | $120 | $360 | $240 | $720 |
| Scotia Momentum No-Fee | $102 | $306 | $204 | $612 |
*based on spending $400 per month on groceries and $100 per month on gas
**based on spending $800 per month on groceries and $200 per month on gas
Which Card Is Best?
For higher spenders, the RBC’s cash back card comes out ahead over the long term. That’s because there’s no limit on how much you can earn at the 1 percent tier. The Smart Cash card, on the other hand, caps your earnings after you spend $1,250 in a month.
But if you spend a lot on groceries and gas, but not on much else, the MBNA Smart Cash card is your best bet. You’ll get 5% cash back for six months on grocery and gas spending, and 2% cash back thereafter. The downside to the Smart Cash card is that there’s a $400 per month cap on grocery and gas spending, and it only pays 1% on all other purchases, up to a maximum of $1,250 a month.
One helpful tip for Smart Cash cardholders is to upgrade to the Smart Cash World MasterCard after a year or so of using the Smart Cash Platinum card. Since it’s a World card, you’ll need to earn $60,000 personal income in order to qualify. But once you make the switch, you’ll no longer have a cap on how much cash back you’ll earn, plus, you’ll get another 6 months of the 5% cash back on groceries and gas purchases.
As parents with young children will tell you, daycare is expensive. It’s especially costly if you have two small children who aren’t school age yet.
As more and more families are dual income these days, young families need to know what options are available to them for childcare so they can manage their finances accordingly.
Related: How To Survive And Thrive As A Single Income Family
The Issue Of Childcare
If both parents are employed full time, kids aged 1-4 need to be taken care of before they enter the public school system. For many families with two children in this age range, it may be difficult to make ends meet.
To explore this problem, let’s use an example:
Two children are born two years apart and both parents work full time.
Daycare
The first option is to send your two children to daycare full time. Here is a table illustrating daycare costs for two children born two years apart.
In this example the mother stays home during the first year of birth then goes back to work. At the end of year six, both children should be in the public system thanks to full day kindergarten.
|
|
Year 1
|
Year 2 |
Year 3 |
Year 4 |
Year 5 |
Year 6 |
|
Child 1 |
Child born mother stays home |
Daycare: Infant (6 months) Toddler (6 months) |
No daycare, mother stays home
|
Daycare: Preschool: 1 year |
Full day kindergarten |
Kindergarten |
|
Cost |
None |
$16,400 |
None |
$10,700 |
None |
None |
|
Child 2 |
NA |
NA |
Child born mother stays home |
Daycare: Infant (6 months) Toddler (6 months) |
Daycare: Toddler (6 months) Preschool (6 months) |
Daycare: Preschool: 1 year |
|
|
None |
None |
None |
$16,400 |
$16,400 |
$10,700 |
|
Total |
None |
$16,400 |
None |
$27,100 |
$16,400 |
$10,700 |
The total cost over six years for two children born two years apart in this scenario is $70,600!
*The above numbers are based on a year with 243 working days (253 – 10 vacation days)
**Costs were calculated using the city of Toronto “mid range” fees of $76 for infants, $60 for toddlers and $44 for preschoolers per day.
Home Based Daycare
A home based daycare may be more cost effective than one run out of a larger facility. Prices vary widely based on several factors such as program and location. One home based daycare I ran across costs $13,500 per year for a toddler.
Employer Provided Daycare
Some employers provide daycare as part of their benefits package. A previous employer of mine provided emergency day care services for a few days per year. Be sure to consult with your employer to find out what child care options might be available.
Live in Nanny
For many families, a live in nanny could be an option. At approximately $1,600 per month a live in nanny would be paid $19,200 per year plus taxes.
From the table above it would make sense to hire a live in nanny for year four. However in subsequent years as daycare costs decrease, the cost for the nanny would not offset the daycare costs.
Keep in mind however that a live in nanny may provide more services than a normal daycare program. They may perform housework such as cleaning, preparing meals, picking up or dropping kids off at school, etc. The additional funds spent may well be worth it.
Live Out Nanny
At around $2,000 per month ($24,000 per year), a live out nanny is a more expensive option since they will need their own accommodation.
Grandparents
Grandparents usually love to take care of the little ones and are a source of relief for couples who need some alone time. Grandparents may consider taking care of the kids for an extended period of time, say a couple of weeks, but counting on them to replace structured programs is probably not an option.
One Parent Stays Home
One option that many families opt for is to have one parent stay home. Classically this has been the mother but these days the father may want stay at home!
Related: Can You Afford Not To Stay Home With Your Kids?
In the example above, year 4 is the most expensive year with daycare costs over $27,000. In the event one spouse makes less than $31,000 per year before tax ($27,000 after tax) it may make sense financially for that person to stay home with the kids.
Not only are there financial savings to be had but the kids are getting to spend more quality time with their mother or father. Keep in mind that if you have three children, the case for a stay at home parent gets stronger.
Regardless of what the numbers say, staying home to raise children is a very personal and emotion decision.
Related: A Mother’s Struggle Between Work And Kids
***Childcare expenses are tax deductible up to a certain amount. More details are available here.
What’s Best For Your Family?
While there isn’t a specific solution to the double daycare dilemma and the general high cost of childcare, there are many ways to tackle the problem.
It will come down to family circumstances, incomes and the amount of time you want to spend out of the workforce.
One way to lower the impact of high childcare costs is to plan for it. You could set aside a percentage of your income each month to begin building a cushion for this a couple years in advance.
If you are already dealing with high costs, sit down and map out what those costs will look like in the future and adjust spending on discretionary purchases accordingly.
Remember that the high costs of having two children in daycare will diminish eventually and your finances can then take a breather. Don’t relax too much though because you’ll then need to start saving for their University or College education!
Related: Where To Find The Best Savings Accounts For Children
Andrew Martin is a personal finance and investing blogger from Toronto, Ontario with a background in technology and a passion for travel. His blog, She Thinks I’m Cheap aims to help Canadians make more money by sharing facts, stories and advice.