I’ve read quite a few posts this past week about kids. Kids and money and costs and maternity leaves and RESPs and whether or not we can view them as an investment or not. I wrote about the costs of kids activities. They seem to be everywhere on the blogosphere this month. So, reading all those posts and looking at what is going on in my life, sparked a topic that I thought some may find interesting and useful. stragety
One thing couples are well aware of when it comes to having babies is that they will drain your money, but they may not be aware of the fact that they will also be a new source of money funneling IN. There are a variety of ways in which a baby will add to your monthly income and I’ve devised a few ways to actually maximize that income.
Lets first look at the sources of money coming in for parents in Canada:
1. Universal Child Care Benefit (UCCB)- This is a taxable benefit paid to all parents of children aged 6 and under in Canada. You will recieve $100 monthly for each child, up to, an including the month they have their 6th birthday. That total over the 6 years equals $7,200 per child. This benefit will be taxed to the lower income spouse.
2. Canada Child Tax Benefit (CCTB)- is a tax-free monthly payment available to eligible Canadian families to help with the cost of raising children. It may or may not incorporate the National Child Benefit(NCB), a monthly benefit for low-income families with children, and the Child Disability Benefit (CDB), a monthly benefit for families caring for children with severe and prolonged mental or physical impairments. These amounts vary year to year as they are based on the previous years earnings and will be calculated once your income tax is filed.
So there you have two sources of income that if used wisely, can be utilized to make you even more money. If you were to funnel all these monies into an RESP for your child, you would not only gain interest on that money for your child’s education fund, but you will also be eligible to recieve the CESG on top of that as well.
An RESP is a registered education savings plan and the CESG is the Canada Education Savings Grant. According to the Government of Canada website, the Basic CESG is a payment of 20% on RESP contributions made in respect of an eligible beneficiary, up until the end of the calendar year in which the beneficiary turns 17.
So let’s look at that with a general calculation. If you were to put the $1,200 UCCB you receive each year, into an RESP, you will receive an additional 20% on that through the CESG program, for a total of $1,440 per year, at minimum. Over 6 years that is $8,640 into education savings for your child without ever having to take a penny from your own pocket. Now, depending on your income levels, that money could be more when you factor in the Additional CESG and the CLB, or Canadian Learning Bond. More information about those two programs can also be found at the Government of Canada website, along with more detailed instruction about the UCCB and CCTB. They are based on income levels and you will need to seek the advise of a qualified professional to calculate the eligiblity and exact amounts.
If you add in any monies collected from the government for Canada Child Tax Benefit over those 6 years, you could easily fund a large portion of your child’s education soley through government funds essentially making your children’s education “free” or government funded.
You can use the money from UCCB or CCTB for anything. There are no rules on how it needs to be spent. It is intended to help with the cost of raising a family and many of us may need those funds on a month to month basis. If the option is there to put it into savings, I really believe this is one of the best strategies to utilize and optimize that money. You are not only receiving it once from the government, but you are turning around and taking advantage of another one of their programs to make more money for your child. It’s an excellent strategy to maximize what is available through our government for parents and children.