Investing in XEQT on Parental Leave: How to Keep Building Wealth When Income Drops

When my wife and I found out we were expecting our first child, I did what any personal-finance-obsessed Canadian would do: I opened a spreadsheet. I mapped out the income drop, the new expenses, the timeline for parental leave, and the big question that kept nagging at me – should I pause my XEQT contributions?

It felt responsible. We were about to go from two full incomes to one-and-EI. Diapers, formula, car seat, daycare waitlist fees – the list of new costs was growing fast. Surely we could just “take a break” from investing for a year and pick it back up when things normalized.

That instinct is one of the most expensive mistakes new parents make.

In this guide, I’ll walk you through how to keep investing in XEQT during parental leave in Canada, why it matters more than you think, and the practical strategies my family used to stay on track.

Understanding the Canadian Parental Leave Landscape

Before we talk investing strategy, let’s get clear on what parental leave actually looks like financially in Canada. If you haven’t gone through it yet, the income drop can be a shock.

Employment Insurance (EI) Parental Benefits

Canada offers two main options for parental leave benefits through EI:

What This Means for Your Wallet

Let’s say you earn $80,000 per year. Here’s what happens to your income on standard parental leave:

• Normal monthly take-home (after tax, rough estimate): ~$5,000
• EI monthly benefit (55% of insurable earnings, capped): ~$2,670
• Income drop: Roughly 47% less money coming in

That’s a massive hit. And if you choose extended leave at 33%, the drop is even steeper – you could be looking at 60-70% less income for over a year.

Employer Top-Up Programs

Some employers offer “top-up” programs that bridge part of the gap between your EI benefits and your regular salary. These vary wildly:

• Government and public sector jobs: Often top up to 93-100% of salary for 15-25 weeks
• Large corporations: May offer 75-100% top-up for a limited period
• Small businesses and startups: Rarely offer any top-up at all

If you’re lucky enough to have a top-up, your financial picture during leave looks much brighter. But even with one, the top-up usually expires well before your leave does, leaving you on straight EI for the remaining months.

Note for Quebec residents: If you live in Quebec, you’re covered by QPIP instead of federal EI, which generally offers higher replacement rates (up to 70-75%). The strategies below still apply, but your income gap may be smaller.

The Real Cost of Pausing Your XEQT Contributions

Here’s where most new parents go wrong. They look at the reduced income, feel the squeeze, and say: “I’ll just stop investing for 12-18 months. It’s not that long.”

But when it comes to compound growth, every month matters – especially early in your investing journey.

Let me show you what I mean with real numbers.

Comparison: Pausing vs. Reducing vs. Maintaining Contributions

Let’s assume you normally invest $500/month into XEQT, you’re taking a 12-month parental leave, and XEQT returns an average of 8% annually over the long term. Here’s what happens over 25 years depending on what you do during that one year of leave:

*Assumes $500/month contributions for all other months, 8% average annual return, compounded monthly.

The cost of pausing for just one year is roughly $16,400 in lost future wealth. That’s not just the $6,000 you didn’t invest – it’s the $10,400 in compound growth that money would have generated over 25 years.

$16,400 is roughly a year of university tuition for your kid. The year you “couldn’t afford” to invest might cost your child a year of school down the road.

Even dropping to just $100/month – about $3.30 a day, the price of a Tim Hortons coffee – preserves most of that compounding power.

6 Practical Strategies for Investing in XEQT on Parental Leave

You don’t need to be a financial wizard to keep investing during leave. You just need a plan. Here are the six strategies that worked for my family, and that I’ve since recommended to every new parent I know.

1. Front-Load Contributions Before Your Leave Starts

This is the single most impactful thing you can do, and it requires zero sacrifice during your actual leave. If you know your leave is starting in September, you have months of full income to work with:

• Boost your monthly contribution by $100-$300 for the 3-6 months before leave
• Direct any bonuses, tax refunds, or windfalls straight into your XEQT account
• Cut discretionary spending early (you’ll be cutting it during leave anyway – start the habit before baby arrives)

If you normally invest $500/month but bump it to $750/month for 6 months before leave, you’ve banked an extra $1,500 – three months of reduced contributions already covered.

Pro tip: Set up automatic contributions through Wealthsimple. Automate now, adjust later.

2. Use the Canada Child Benefit (CCB) to Invest

This is my favorite strategy because it feels like free money – because it kind of is.

The Canada Child Benefit (CCB) is a tax-free monthly payment to help families raise children. For 2026, the maximum annual benefits are approximately:

• Under 6 years old: ~$7,787 per child (~$649/month)
• 6 to 17 years old: ~$6,570 per child (~$548/month)

The amount you receive depends on your family’s net income, but even middle-income families often get $300-$500/month for their first child.

The strategy: redirect a portion of your CCB directly into XEQT. Even putting 25-50% into your XEQT account can replace your pre-leave contributions. The rest goes to diapers, wipes, and the seventeen onesies your baby will outgrow in a month.

Even at a household income of $100,000, investing half the CCB gives you $155/month in XEQT contributions – enough to maintain meaningful compound growth.

3. Reduce Your Contribution Amount (Don’t Stop Entirely)

This is the core message of this entire article: something is dramatically better than nothing.

If you were investing $500/month and you need to drop to $100/month during leave, do it. If you can only manage $50/month, do that. Even $25/month keeps the habit alive, keeps your automatic contributions running, and keeps the compounding clock ticking.

Here’s why the habit matters as much as the amount:

• Behavioral finance research consistently shows that people who stop contributing have a much harder time restarting than people who simply reduce
• The “just for now” pause has a nasty tendency to stretch from 12 months to 24 months to “whenever things settle down”
• Maintaining the automation means you never have to make the decision to start again – you just adjust the amount back up when income returns

Reduce, don’t stop. This is the hill I’ll die on.

4. Temporarily Pause Non-Essential Subscriptions and Redirect the Savings

Go through your bank statements and add up your monthly subscriptions. Here’s what my wife and I cancelled or paused during leave:

• Gym memberships (we weren’t sleeping, let alone working out): $80/month
• Streaming services we barely used (kept one): $35/month
• Meal kit delivery (we had freezer meals and casseroles from family): $60/month
• Magazine and app subscriptions: $20/month

Total recovered: $195/month – nearly 40% of our pre-leave XEQT contribution, just from cutting things we genuinely didn’t need during that phase of life.

5. Consider a Temporary Shift to TFSA-Only Contributions

This is a tactical move I’ll cover in more detail below. The short version: your income is lower on parental leave, so RRSP deductions are worth less. TFSA contributions give you the same benefit regardless of income.

If you’ve been splitting between TFSA and RRSP, consider directing everything to your TFSA during leave. Save your RRSP room for when you’re back at full salary.

6. Have an Honest Conversation with Your Partner

If you have a partner, this isn’t a solo decision. Sit down together before the baby arrives and align on:

• What’s the minimum monthly XEQT contribution you’re both comfortable with?
• Which account (yours, theirs, joint) should contributions come from during leave?
• What’s the plan for the CCB – how much goes to expenses vs. investing?
• At what point would you actually need to pause contributions (emergency fund threshold)?

Having this conversation before the baby arrives – when you’re well-rested and thinking clearly – is infinitely better than having it at 3 AM with a screaming newborn.

TFSA vs. RRSP: Where to Invest XEQT During Parental Leave

This deserves its own section because it’s a decision that can save you real money if you get it right.

Why Your Account Choice Changes on Leave

The fundamental difference between TFSA and RRSP becomes especially important when your income drops:

The Math Behind the Decision

Let’s say your normal salary puts you in a 30% marginal tax bracket. During parental leave, your EI income might drop you to a 20% bracket.

• $1,000 RRSP contribution at 30% bracket = $300 tax refund
• $1,000 RRSP contribution at 20% bracket = $200 tax refund

That’s $100 less benefit for the exact same contribution. Over a 12-month leave, if you’re contributing $500/month, that’s potentially $600 in lost tax efficiency by contributing to your RRSP during leave instead of waiting.

The Strategy

1. During parental leave: Direct all XEQT contributions to your TFSA
2. When you return to full income: Resume or increase RRSP contributions to catch up
3. Use the higher RRSP refund next tax season to make a lump-sum XEQT purchase

You’re investing the same total amount but getting a bigger tax benefit overall. Over a career, these optimizations add up.

One caveat: If your TFSA is already maxed out, contributing to your RRSP is still better than not investing at all. Don’t let perfect be the enemy of good.

The Emotional Side: Guilt, Fear, and the “Just for Now” Trap

I’d be lying if I said the financial side was the hardest part. It wasn’t. The hardest part was the guilt.

When my wife was on mat leave, there were moments where putting $200 into our Wealthsimple account felt irresponsible. We were buying formula ($45 a can), our hot water tank decided that month to give up on life, and the car needed new brakes. Every dollar felt spoken for.

That little voice in my head kept saying: “Just pause the investing. You can always catch up later. The baby comes first.”

Here’s what I’ve learned: that voice is wrong, but it’s not stupid. It comes from a real place of love. You want to provide for your child. Those feelings are valid.

But investing in XEQT for the long term is providing for your child. The $100 you invest today could be worth $700+ by the time they’re 25. You’re not choosing between your baby’s needs and your portfolio – you’re choosing between their needs today and their opportunities decades from now.

How to Deal with the Guilt

• Reframe it: Investing isn’t taking money away from your family. It’s building your family’s future.
• Start small: If $500/month feels impossible, $50/month will still make you feel like you’re making progress – because you are.
• Automate and don’t look: Set up the auto-contribution, delete the app from your phone for a few months, and stop checking. The less you see the money leave, the less it stings.
• Remember the math: You’re not losing $100/month. You’re gaining $700+ in 25 years. The net present value of that investment is overwhelmingly positive.

The “Just for Now” Trap

Here’s a pattern I’ve seen with friends and coworkers:

1. Baby arrives. Contributions paused “just for now.”
2. Leave ends. Back to work, but daycare costs hit ($1,500-$2,000/month in many cities). Contributions stay paused.
3. A year later, the kid is in a routine, but now there’s talk of a second child. Contributions still paused.
4. Four years later, they haven’t invested a dollar. The habit is gone. The TFSA room has piled up unused. The compound growth window has narrowed.

Don’t let “just for now” become “just forever.” Even the smallest contribution keeps the habit alive and the door open.

Parental Leave Investing Checklist

Print this out and stick it on the fridge next to the baby feeding schedule.

3-6 Months Before Leave

• Calculate your expected EI benefits and any employer top-up
• Build or top up your emergency fund to 3-6 months of expenses (at the reduced-income level)
• Front-load XEQT contributions by increasing your monthly amount temporarily
• Review your budget and identify subscriptions or expenses you can pause during leave
• Open a TFSA if you don’t have one (you’ll want it for leave-period contributions)
• Set up automatic XEQT purchases through Wealthsimple if you haven’t already

1 Month Before Leave

• Adjust your automatic XEQT contribution to your leave-period amount (even if it’s just $50/month)
• Switch contributions from RRSP to TFSA if applicable
• Have the money conversation with your partner
• Set up direct deposit for your EI benefits
• Apply for the Canada Child Benefit (you can apply before the baby is born through pre-registration in some provinces)

During Leave

• Once CCB payments start, set up a percentage to auto-invest in XEQT
• Review your budget monthly for the first 3 months, then quarterly
• Resist the urge to pause contributions entirely – reduce if needed, but keep going
• Don’t check your portfolio more than once a month (you have better things to do, like sleeping)
• If you receive gifts of money for the baby, consider investing a portion in XEQT

1-2 Months Before Returning to Work

• Increase your automatic XEQT contribution back to your pre-leave amount (or higher to catch up)
• Consider resuming RRSP contributions if you were TFSA-only during leave
• Factor in daycare costs and adjust your contribution amount accordingly
• Review your overall financial plan – your priorities may have shifted now that you’re a parent
• Celebrate. You made it through parental leave with your investing habit intact. That’s a genuinely big deal.

How Small Amounts Compound Over Your Child’s Lifetime

Let me leave you with one more set of numbers, because this is the part that genuinely changed how I think about investing during leave.

Let’s say you have a baby in 2026 and you invest just $100/month into XEQT from the day they’re born. No increases, no lump sums, just a steady $100/month. At an average 8% annual return:

$100 a month turns into $150,000 by the time your child is 30. That could be a house down payment, a debt-free start to their adult life, or the seed capital for their own investment journey.

And it all starts with the decision you make right now, during parental leave, to not stop.

The months when investing feels hardest – when the income is lowest and the expenses are highest – are often the months that matter most. Not because of the dollar amounts, but because of the habit you’re building and the compounding runway you’re protecting.

Common Questions from New Parents

“What if we literally can’t afford to invest anything during leave?”

Then don’t. If your emergency fund is depleted, if you’re choosing between groceries and XEQT – groceries win every time. This article is for parents who can invest something but are tempted to stop out of caution. If your situation is genuinely tight, focus on stabilizing first. XEQT will be there when you’re ready.

“Should I sell XEQT to cover expenses during leave?”

Almost certainly not. Selling permanently removes that money from the compounding engine. It’s much better to reduce or even pause contributions than to sell existing holdings. The only exception would be a true financial emergency where you have no other options.

“My partner and I are both taking leave. What then?”

If you’re both on reduced income simultaneously, the squeeze is real. Prioritize in this order:

1. Emergency fund (keep it at 3+ months of reduced-income expenses)
2. Essential expenses (housing, food, insurance)
3. Any XEQT contribution you can manage (even $25/month combined)

When one partner returns to work, ramp contributions back up on their income first.

“Is it worth investing just $25 or $50 a month?”

Yes. A thousand times yes. $50/month at 8% for 25 years grows to roughly $47,500. That’s not nothing. And more importantly, maintaining the habit means you’ll seamlessly scale back up when your income recovers. The people who stop entirely are the ones who struggle to restart.

Your Next Steps

You’re about to enter one of the most beautiful, exhausting, and rewarding chapters of your life. The financial stress is real, but it doesn’t have to derail your wealth-building.

Here’s what to do this week:

1. Log into your Wealthsimple account (or open one if you haven’t yet) and check your current automatic XEQT contribution
2. Set a parental leave contribution amount – whatever you can afford, even if it’s $50/month
3. Set up the automation so it happens without you thinking about it
4. Apply for the CCB if you haven’t already, and decide what percentage you’ll invest
5. Talk to your partner about the plan and get on the same page

Five steps, 20 minutes, probably while the baby naps (or while you desperately try to get the baby to nap).

The parents who build real wealth aren’t the ones who make the most money. They’re the ones who keep investing through the hard parts. Parental leave is one of those hard parts. But it’s temporary. And the investing habit you protect right now will pay dividends – literally – for the rest of your life.

XEQT (iShares Core Equity ETF Portfolio) is a long-term investment. Returns are not guaranteed, and past performance does not predict future results. This article is for educational purposes and is not financial advice. Always consider your personal financial situation before making investment decisions.