Parents, use the Canada Child Benefit increase wisely
The Canada Child Benefit (CCB) is increasing in July which is very good news for parents!
If you are new to this benefit, the money is a financial boost for families and it’s tax-free up to a new annual maximum benefit of $6,639 per child under age 6 and to $5,602 per child ages 6 through 17. This is an increase of approximately 3 per cent, or a few hundred dollars more annually, since 2016. The greater your household income and more children you have, the greater the reduction in the CCB. And, for high-income families, you’re getting zilch.
Sound appealing? If you’re ready to apply, you can register your application through the CRA’s Automated Benefits Application. But parents, if you’re really behind on your taxes, you need to catch-them-up first in order to qualify for the CCB.
Once you start receiving the CCB money, consider using it in the following financially wise ways.
- Providing for basic needs. If the cost of diapers and food is creeping up on you, use the CCB to provide for these basic essentials. If you couple this with smart shopping using digital coupons and at discount retailers, you should be able to stretch your dollars up to 30 per cent further when compared to paying full prices at higher-end retailers.
- Use the free CCB to get more free money by contributing to an RESP. A Registered Education Savings Plan allows you to proactively save for your child’s future education. And, there’s a big bonus with this strategy; the Canada Education Savings Grant (CESG). This is a free grant up to 20 per cent of whatever you contribute to a maximum of $500 annually (and a maximum of $7,200 over the lifetime of the account). And for parents with a qualifying low-income, pair this strategy with another free benefit — the Canada Learning Bond. This benefit totals another $2,000 over the lifetime of the RESP account. RESPs can be opened through your preferred financial institution and you can contribute monthly on the day the CCB money is deposited into your bank account.
- Build a rainy day fund. By setting aside a chunk of the CCB in a rainy day fund you’ll be financially prepared should a family emergency arise such as urgent travel or a leaky roof needing repair. Just make sure this account is collecting interest and that it’s not too easily accessible; which will quell the temptation to spend it on an unnecessary trampoline. As a general best practice, strive to build your rainy day fund to the equivalent of three months’ worth of expenses.
- Start an allowance system. Once your children reach the age of 5 or 6, it’s a good idea to start teaching them how to manage money. Have your kids practise spending and saving using a small allowance of $5 to $10 per week. Coach them when they fall off track and cheer them on when they make smart decisions. And remember that every retail experience you, or your children, have can be a teaching moment.
- Pay off any debts related to your parental leave. Parental leave can set parents back financially because of lost income and child care costs. So, if you’ve accumulated balances on credit cards or lines of credit, consider paying those off. Tackle the highest interest balances first, and then move on to the next highest, and so on.
Ultimately, it’s up a parent’s discretion as to how to spend the CCB. Basic needs are the highest priority, of course, but if you can afford it, try to allocate some towards savings. This will ensure that your family is financially strong.