3 Great Ways to Use Your Canada Child Benefit Payment

A little extra money never killed nobody! And if the amount is not taxable, things do get more and more lucrative, with you having some extra funds on your side to spend them the way you fancy.

That’s the story about the Canada Child Benefit (CCB) payment which you might have first received in July, provided you’ve got children.

About the Canada Child Benefit

Before exploring some astute ways to disburse this tax-free payment, let’s walk through the concept of CCB. Introduced in 2016’s Federal Budget, the CCB replaces both the Universal Child Care Benefit (UCCB) and the Canada Child Tax Benefit (CCTB).

The UCCB was a universal but taxable benefit of $160 a month per child given to all parents having children under the age of six. And the CCTB, a tax-free payment, was made to entitled families to help them raise children under 18 years of age.

The CCB will be most beneficial for low- to middle-class families with children. Households having a net income (after all tax deductions) less than or equal to $30,000 will be on the highest benefit slab ($5,400 per child between 6 and 17 years of age and $6,400 per child under 6 years of age.

Families having an after-tax income more than or equal to $190,000 will get no benefit whatsoever while the amount will be clawed back for households having an after-tax income more than or equal to $30,000.

For instance, a family having a net income of $65,000 and a 3-yr-old child will get 12 monthly-payments of around $329.17 ($3,950 yearly) by the fall of 2017. The Government has also created a CCB calculator to help you estimate the amount of benefit your family will get.

How to best utilize Canada Child Benefit payments

The CCB will offer far more benefits than earlier programs to about ninety percent of families, tempting you to spend a touch more than what you normally do. However, you can make the most of this money to foster long-term benefits for your child and family by spending it wisely. Here’re a few good ways to use this money more prudently:

How about an RESP contribution

It doesn’t get any better than this! Saving your CCB payments to fund the post-secondary education of your child is, by far, the best bet, if you can afford it well. A recent poll by Ipsos showed that parents are most likely to use the lion’s share of their CCB funds for day-to-day expenses while savings for the post-secondary education was the second most favored option.

Suppose you save $2,600 as an RESP contribution for (say) 18 years, get the annual $500 Canada Education Savings Grant (a lifetime maximum of up to $7,200), and bag a 7% yearly return on your funds, you may well end up with something around $102,000. And there is every likelihood that the Federal Government may end up paying for most (if not all) of your child’s tuition.

Engage in tax-sheltered savings account Though you won’t get any grants on your contributions to a TFSA, you’ll stand tax-sheltered and will have to pay no taxes on any interest income or capital gains. That sounds worthwhile, isn’t it? As an alternate, going for a contribution in an RRSP, too, sounds like a fine ploy since it is most likely to end up in a tax refund in 2017.

Use either account to save for your retirement and also mull over savings in a high-interest, taxsheltered savings account. Read and heard it all: never put all your eggs in the same basket, portion up your funds and spread them wisely in savings, mutual funds, ETFs, stocks, and/or GICs.

Also consider the golden rule to financial stability and success: “Do not save what is left after spending, but spend what is left after saving, ” Warren Buffet Consider making charitable donationsMaking well-planned charities and donations not only make you feel good about yourself but is also a surefire way to get a tax credit. Make good donations and get your children involved in the process too; make them learn the significance of giving to those who are underprivileged.

The bottom line Parents have full legal authority to use their CCB benefits in any way they prefer and, beyond doubt, making expenses on fulfilling the fundamental necessities of life, including food, clothing and shelter, is of high priority and you must surely put first-things-first. However, if, and to the extent, you can afford to spend your CCB benefits for something else, do give a thought to the options given above. You’ll be more than pleased you did.