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Government fund a portion of your child’s education

4 Jun

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.

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14 Responses to “Government fund a portion of your child’s education”

  1. pikalainat June 15, 2014 at 11:44 pm #

    Very descriptive post, I loved that a lot. Will there be a
    part 2?

  2. See Debt Run (@seedebtrun) June 6, 2012 at 3:25 pm #

    I don’t think there’s anything like that here in the states, but I’m definitely going to look into it to make sure I’m not missing anything! It really seems like the Canadian government cares about families. Step it up, U.S.!
    -M

    • myjampackedlife June 7, 2012 at 11:26 am #

      for all their flaws, they do have a fair grasp on the struggles families are facing and they do do alot to help out. The programs are as simple as checking off a box on your yearly income tax to apply. Once you do it the first time, its all taken care of from there. We are fortunate to have all the social programming that we do. even if we complain…..

  3. fromshoppingtosaving June 4, 2012 at 10:33 am #

    I never thought of that! I wonder if we have similar programs in the US (probably not) but I know they are a huge tax benefit haha. Funny to talk about children like tax benefits. Anyway, I should look into this more…

    Thanks for your comment on my post today 🙂

    • myjampackedlife June 4, 2012 at 11:28 am #

      Our government, for all its flaws, really does take an active part in helping with the costs of children and supporting our mothers. We have an excellent maternity leave program. Its one of the things i find most fascinating about the US is that they have nothing in place. They seem to be one of the only “westernized” countries to not put any value in the mother child bond. something really needs to be done about that.

  4. Canadian Performer's Money June 4, 2012 at 10:14 am #

    I was reading the “me and my money” section in the Globe and Mail this weekend which highlights a different family every week and their journey learning to save and invest.
    I was surprised by the number of angry comments directed at this couple because they DIDN’T have kids. Like they were somehow cheating by avoiding the cost of raising children and investing that money instead.
    Your article points out that there are many government benefits that people with children can take advantage of that childless couples can not. Having children is a choice that brings with it costs and responsibilities but at the same time most people count their children as the greatest blessing in their lives. Not having children is also a choice that should be equally respected.

    • myjampackedlife June 4, 2012 at 11:23 am #

      absolutely, people should not have kids if they don’t want them just to fit into some social model. They are expensive to raise and that shouldn’t be overlooked for all the other things they bring to our lives. thanks for commenting

  5. Modest Money June 4, 2012 at 8:47 am #

    That’s great that the government helps out parents like that. Every little bit helps out. Your idea of putting all that money into an RESP is quite smart. I don’t have kids or even a girlfriend right now. So I don’t have to worry about this stuff yet, but it’s good to know what kind of stuff I should be doing when that does happen.

    • myjampackedlife June 4, 2012 at 11:24 am #

      We all have tips and tricks how to get our money’s worth out of the kids, but any way we can make what we are given work to our best advantage is important to share. im hoping to learn some more tricks by writing mine.

  6. addvodka June 4, 2012 at 7:37 am #

    When I read Gail Vaz Oxlade’s book Debt Free Forever, she mentioned that there is a program out there to help with kid’s college costs that can start being collected when the kid is a baby. I don’t know if that’s still the case or if she was talking about one of the things you’ve mentioned, but I do think that the help the government provides is great.

    • myjampackedlife June 4, 2012 at 11:26 am #

      its definitely a huge help. Some people need that money to raise them everyday while others can choose other options for the money. We certainly will take whatever they offer to us.
      i’ll have to get that book, i’ve never read it, but we obviously think alike!

Trackbacks/Pingbacks

  1. myJAMpackedlife - July 15, 2012

    […] I have found a lovely personal finance community that I love to read about and have even mustered up the courage to try to write about. For moms out there I recommend the costs of children’s activities and how to get the government to pay for your child’s education. […]

  2. Government fund a portion of your child's education … | Learn By Song : Early Children Education & Development Information - June 4, 2012

    […] Source: Government fund a portion of your child's education … […]

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