How to Make the Most of the Canada Child Benefit Payment Increase
September 1, 2020
Or how to transform $25 per month into thousands of dollars
Do you receive the Canada Child Benefit (CCB)?
If yes, you were certainly happy to receive an extra $300 per eligible child in your May instalment, in addition to learning that CCB payments would be increased slightly as of July.
As a reminder, CCB payments are tax-free and are calculated based on your adjusted family net income from the previous year, as well as the number of children you are primarily responsible for and their age.
For example, a family with 2 children aged 4 and 7 years whose adjusted family net income is $60,000 per year received approximately $695 per month in CCB payments this year. Since July, the CCB was increased by approximately $310 per year, i.e a little over $25 per month, which represents a new monthly amount of $721.
For the many families that have been financially affected since the beginning of the COVID-19 pandemic, these additional sums are more than welcome to balance their budget. And for families that weren’t impacted too much, this extra money will still be useful. So, how can you make the most of it?
Back to School Is Expensive…
Parents know that back to school comes with tons of expenses: new clothes for your youngest daughter who’s grown a lot, lunch boxes for her and her big brother, school supplies, textbooks, and the list goes on! You’ll probably spend your increased May CCB payment and additional amounts in July, August and September on these purchases… Once you’ve covered the essential expenses, if you have money left, you can put it toward boosting your savings for future projects, like retirement, or add to your financial cushion.
Post-Secondary Education Is Even More Expensive!
Another option: this extra CCB money is a great opportunity to take advantage of the government grants paid into RESPs. For every dollar you invest in an RESP, the governments of Canada and Quebec add generous grants matching up to 60% of your contributions, depending on your adjusted family net income. That’s why investing in an RESP is a smart move!
Let’s take the example of a family with 2 children again. By increasing their RESP contributions by only $25 per month, they could end up with a nest egg of over $2,000* in five years—hard to beat!
Of course, you can’t add to your RESP indefinitely, and certain limits apply. Contact a Kaleido representative to learn more about how you can fully benefit from the increased CCB payments by boosting your RESP. If you haven’t opened an RESP yet, this is the perfect opportunity to kick-start your education savings project!
* These amounts are approximative. The calculations are hypothetical and take into account a 30% government grant rate and a 3% annual compound rate of return.