Financial Stability For New Families

Financial Stability For New Families

Financial Stability For New Families

So you just had your first beautiful child and you’re feeling a tad anxious about all the expenses that have been popping up. The good news is that there are several ways that you can help reduce your expenses by understanding what benefits are available through the government. Often the most difficult part about receiving governmental benefits is knowing about them! Below is a list of benefits that you can receive as a parent.

Please let me know if you have any further questions; it would be a pleasure to help.

Also, don’t forget to check out who we are to learn more about how we help individuals and families.

 

i) Child Tax Benefit

Note: The Federal Government announced in the 2016 budget that this benefit will be eliminated in July 2016

This is a non-taxable tax benefit that currently pays $1,471 a year or $122.58 a month for households with children under 18 years of age. Payments also increase with each additional child. Benefits are reduced by 2% of household income that is over $44,701 for one child and by 4% for families with two or more children. For example, if a household makes $70,000, then this is $25,299 over the $44,701 threshold and therefore the child tax benefit is reduced by $505.98 ($25,299 x 2%).

Additional child supplements are also available for those households with low income or children with disabilities. The Child Benefit Supplement is an extra monthly payment of $189.92 for a single child and larger payments for households with multiple children. Benefits are reduced by 12.2% for all household income that exceeds $26,021 a year (calculated in the same way as the Child Tax Benefit). This supplement also varies with the amount of children.

 

ii) Registered Education Savings Plan (RESPs)

A great savings plan that helps you save up for your child’s future education. RESPs are a registered account that can hold the same or similar investments that you may have in your RRSP or TFSA. The big benefit here is that the government will contribute extra funds into the account and your investments grow tax-free (until it is withdrawn).

The main payment that the government makes into a RESP is called the Canada Education Savings Grant. This grant will pay an extra 20% of what you contribute into the RESP. The annual limit for this grant is $500 (if you contribute $2,500) and an additional $500 for an unused grant room from past years. So technically you could contribute up to $5,000 a year and the government would add an extra $1,000.

There is also an Additional Canada Savings Grant that is available to moderate income households. If a household earns under $43,953, then the government will match 40% of the first $500 and if household income is $43,953-$87,907, then they will match 30% on the first $500. This extra grant is really just a way to motivate people to utilize RESPs.

There’s even another bonus available to moderate income households! The Canada Learning Bond will pay an incentive up to $2,000, and if a household received the Child Tax Benefit Supplement listed above, then they will receive a payment of $500.

Ultimately, RESPS are one of the best savings tool for a youth and should not be missed. Further, these funds will compound tax-free for nearly 20 years and have huge investment earning potential.

 

iii) Ontario Child Benefit

This is another benefit that is paid to low and moderate income Ontario households. Monthly payments are $111.33 for each child under 18 and payments are reduced when household income exceeds $20,400. The following calculator can be used to determine exactly how much that you would receive. http://www.cra-arc.gc.ca/bnfts/clcltr/cctb_clcltr-eng.html

 

iv) Universal Child Care Benefit

Note: The Federal Government announced in the 2016 budget that this benefit will be eliminated in July 2016

This is a federal benefit payment that was recently modified during the 2015 Federal budget and if the Conservatives lose the 2015 Federal election then this benefit may be modified or eliminated. Households with children under 6 will receive up to $160 monthly and those with children aged 6-17 will receive up to $60 monthly. You will also be able to get back payments of this child benefit if you’ve not been receiving it. Keep in mind that this is a taxable benefit and the parent that has the lowest income should claim this benefit.

 

v) Children’s Fitness Tax Credit/Children’s Art Tax Credit

Note: The Federal Government announced in the 2016 budget that this benefit will be eliminated on January 1st, 2017

Two similar programs that offer an annual tax credit of $500 for eligible programs. The effect of this tax credit would simply be the reduction of your taxable income for the year. To qualify the child needs to be under 18 and enrolled in a program that is at least 8 weeks long with at least 1 session a week. Camps are also eligible if the program contains at least 50% of a fitness or art component.

Conclusion 

The overall effect of the above programs can be quite substantial. Statistics Canada’s most recent release of Ontario’s median income is $73,700, this equates to a monthly child benefit payment of $234.25 or $2,811 a year (one child). Lower income households (including those of maternal leave) will receive larger payments. A household with an income of $36,850 will receive a benefit of $364.06 or $4,368.72 a year. As you can see, things can become a lot more financially secure for your family if you take advantage of all the child benefits available.

 

As always thanks for reading; if you have any questions please contact me at info@ffcoach.ca or 647-289-0012. Please subscribe to our bi-weekly newsletter to make sure that you don’t miss out on any of our great financial literacy articles. 

 

 

3 thoughts on “Financial Stability For New Families

  1. Amala Jose

    My question is regarding IA Clarington response and Equitable life insurance for kids. The broker who presented the resp mentioned IA Clarington acts more or less like banks and it’s not a group plan. I would like to know if it’s correct.

    Also he presented the Equitable whole life insurance for my 10 months old kid. He mentioned that’s the only one which doesn’t charge administrative fees. The payment is for 20 years.. say if pay 100 cad monthly the kid will be getting a coverage of 275000 cad.
    I am not really good with investment so would like to have an opinion on these.

    1. Matthew Siwiec Post author

      Hello Amala,

      Could you give me the name of the mutual funds that your broker is attempting to sell you? With companies like IA Clarington, you have to be very careful with high MER rates and Load fees. If you tell me the fund names, I could do some more research for you.

      As for insurance, I highly recommend that you use the $100 elsewhere. It usually doesn’t make sense to insure a child. I would instead save those funds to achieve another financial goal, or put the funds in a savings account that can be given to them as a gift when they are older.

      Hope that this helps! Ps, I also emailed you the same response.

      Matt

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