Tips to help make the most of your Canada child benefit

If you’re a parent, you know that raising kids is costly from day one. It can be hard to think about putting money aside for their future, or your own, when daily expenses pile up.

As of July 2016, the government introduced the non-taxable Canada child benefit (CCB) to help eligible families offset the expenses of raising children under 18. The CCB replaces the Canada child tax benefit, the national child benefit supplement and the universal child care benefit.

The amount you receive is based on a number of factors including the number and ages of your children, your adjustedCanada Child Benefit family net income and your child’s eligibility for the child disability benefit. An additional amount for the child disability benefit and related provincial or territorial programs might also be included.

After determining eligibility, Canadian parents can apply online and must file income taxes every year – regardless of employment status – to receive the benefit. For full eligibility and application details, visit the Canada Revenue Agency website.

With the rising costs of education and everyday expenses, setting aside a portion of your benefit amount for your child’s financial future could give them a welcome head start. Depending on your situation, here are a few ideas to consider to help you make the most of your monthly CCB cheque.

Make an RESP contribution

Opening a registered education savings plan (RESP) is an important investment in your child’s future. This tax-advantaged savings vehicle is designed to help you save for your child’s post-secondary education and related expenses, such as housing, food, books, technology and travel. There’s no limit to how much you can contribute each year, but there’s a lifetime maximum of $50,000 per child. As a bonus, the government will help you save through the Canada education savings grant (CESG), which provides 20 per cent on the first $2,500 you put into an RESP each year, to a lifetime limit of $7,200. Some provinces may also provide additional grants.

Start a savings account

With the ever-rising cost of living and uncertain job markets, setting aside a small amount of money for your child beyond their education costs could help to ease future financial burdens. Alternatively, you could contribute a portion of the benefit to your own savings account. This money could be used as an emergency account or to fund unexpected family expenses. If you’re worried about spending your CCB cheque as soon as it arrives, consider setting up automatic transfers that will divert it to your account. Once your emergency reserve is fulfilled, you might consider transferring additional funds to a longer-term investment, like a registered retirement savings plan (RRSP) or tax-free savings account (TFSA).

Consider a life insurance policy

When you buy a permanent life insurance policy for your child early, it means they’ll be insured for life, regardless of any future health problems. Permanent life insurance includes features that can grow money inside your policy over time (called cash value). This money can be accessed during your child’s lifetime.* When your child reaches the age of 25, the policy can be transferred to them tax-free. Later in life, your child could have the option to access the policy’s cash value to contribute to things like supplementing their retirement income or establishing a financial legacy of their own.*

* If money is withdrawn from the cash value of a policy, it may be subject to tax.

Help Insure Your Child Get’s Off to a Head Start

Tuition costs have nearly tripled over the past quarter-century ­– good enough reason to start planning for your child’s university or college education.

With the average cost of a post-secondary education in 2010-2011 at $58,000 – and climbing – and with the maximum contribution to registered education savings plans (RESPs) set at $50,000, you may be looking for other ways to fund your child’s education. Life insurance can help your children fund their post-secondary education if you or your partner die unexpectedly.

Child Life Insurance

Insure Your Child

How does it work? Most permanent life insurance products offer a guaranteed cash value accumulation component that allows the cash value to grow tax-free (within limits).

When it’s time to withdraw funds for your child’s education, you can either withdraw the accumulated cash value or take out a loan against the policy’s accumulation. If you take out a loan, your cash value can continue to grow, provided you repay the loan. Alternatively, you can surrender your insurance policy if coverage is no longer required and apply this money to your child’s education needs (tax may apply).

Purchasing participating life insurance for your child or grandchild is a gift that keeps on giving. A participating life insurance policy has cash value that can grow over time and can be accessed to pay for things like tuition, a new car, or a down payment on a house. With their insurance needs taken care of for life, they can focus on other key priorities.

I can help you make sense of using permanent life insurance to pay for tuition.

Universal Child Care Benefit (UCCB) Increase

The Universal child care benefit (UCCB) is designed to help Canadian families, as they try to balance work and family life, by supporting their child care choices through direct financial support.

The Government of Canada is introducing changes to the law to increase and expand the UCCB. Enhanced payments for the universal child care benefit would take effect as of January 2015 and would begin to be reflected in monthly payments to recipients in July 2015.

Universal Child Care Benefit

The UCCB is increasing for children under the age of six. Effective January 1, 2015, parents will receive a benefit of up to $160 per month for each child under the age of six, up from $100 per month. If the changes to the law pass, parents will receive up to $1,920 per child per year.

The UCCB is also expanding to children aged six through 17. Effective January 1, 2015, parents will receive a benefit of up to $60 per month for children aged six through 17. If the changes to the law pass, parents will receive up to $720 per child per year.

The first enhanced payment will be issued in July 2015 and will include any retroactive payments for the period ofJanuary 2015 to June 2015.

Note
It is the CRA’s longstanding practice to administer tax and benefit measures on the basis of proposed legislation, which has been accepted in principle by Parliament pursuant to a Notice of Ways and Means Motion, unless this legislation or a motion to implement the measures is defeated in Parliament.