The reality is that raising children in Canada has become difficult for many middle-income families. That’s because the cost of living in many cities has become insanely expensive. In fact, your rent or mortgage will often be your largest expense.

The idea behind this post is to give you an average cost of what you’ll spend as a new parent in Canada. That said, if you’re American, many of the rough estimates will also apply. Regardless of if you’re a new parent or thinking about having a child, here are some of the costs to consider when raising a child.

Housing costs

When budgeting for a baby, many people forget to consider housing costs. It doesn’t matter if you’re renting or have mortgage payments; your childcare costs can be significant based on where you live. Major cities such as Toronto and Vancouver have high rent and housing costs. If you live in rural areas or smaller cities, your housing costs may drop, but then you may spend more in other areas.

The cost of housing will always be a concern. Families that grow may require more space, which typically means higher costs. Plus, moving can be expensive. You’d also have to spend more on utilities.

Maternity employment insurance

Maternity leave in Canada covers up to 15 weeks. You can take this paid leave during your pregnancy or after you give birth. After your maternity benefits run out, you can take standard parental leave up to an additional 40 weeks or 69 weeks for extended parental leave. During this time your employer must save your position, and if you’re lucky, they’ll offer some kind of top-up, but if not, maternity employment insurance will help you get by. Employment insurance is meant to replace 55% of your weekly earnings up to a maximum of $650 a week.

Those taking extended leave only get an income replacement of 33% up to a maximum of $390 a week. You’ll hit the cap if your salary is $61,500 or more. To make matters worse, the income is taxable.

Most couples choose to take the leave one after the other, but you could take it simultaneously if you wanted. Whoever has the better top-up benefits should take more time off, but try telling that to the woman who just carried and delivered a baby.

Start-up costs

New parents typically spend a lot when their first child arrives. The cost of a child will vary by family, but some expenses to factor in include:

• Car seat
• Crib
• Formula
• Stroller
• High chair
• Childcare expenses
• Diapers

Even when your kids get out of daycare and diapers, there will still be many expenses that come out. You’ll have to pay for things such as school supplies, extracurricular activities, summer camps, braces, personal care, uninsured healthcare, and more.

The cost of raising children is expensive, but it’s not like you need to accept the price tag of everything you see. Many things can be bought second-hand, which helps reduce the cost of raising kids. Trust me, newborns will not care if their clothes are new or gently used.

Also, if you keep your kids’ stuff in good condition, you can resell them later. That will reduce your total cost overall.

Child care costs

Where you live will determine your daycare costs. Licensed daycare in major cities can cost up to $2,000 a month. Unlicensed home care is a cheaper solution and is worth checking out. Note that some daycares will charge more based on your child’s age. Regardless of which route you decide on, there are limited spots, so put your child’s name on a waiting list as soon as they are born (if not earlier).

With the cost of child care so high, it might even make sense for one parent to stay home for an extended period. MoneySense has a great article on how to find and pay for child care. My wife and I checked out close to a dozen daycares before settling on one that made the most sense for us. We were fortunate that our first choice had availability when we needed it.

In Canada, there is $10-a-day daycare available, but not every childcare facility offers it. As you can imagine, the ones that do have a very long waitlist. 

Other considerations include nannies and private schools. Nannies can live with you, but that will cost more. Private schools often provide before and after-school care as part of your annual expenses. No matter what you settle on, the cost of childcare will add up.

Life insurance

Once you have dependents, life insurance for Canadians is an absolute must. Our children depend on our income to get by, so having a policy will leave them with enough money to get by until they become self-dependent adults.

If you’re young and healthy, term life insurance is affordable at roughly $25-40 monthly in insurance premiums. Generally speaking, the amount you want to get is enough to cover the funeral costs, the balance of your mortgage, and the cost of a college education. Getting life insurance is easy as you can do it all online via companies such as PolicyMe. You’ll still get access to licensed advisors. There’s just no need to meet face-to-face since they walk you through the policies.

Since I’m being all morbid, don’t forget to get your will done. Many people still prefer to go to a lawyer to get their wills done, but they can charge a fair amount. DIY wills kits aren’t bad, but I think there’s a better solution now in Willful. With Willful, you can create a legally binding will online. You only pay for it once and you get unlimited updates for free. Willful makes creating a will quick, easy, and inexpensive. Click my Willful affiliate link and use promo code MONEYWEHAVE15 to get $15 off your will.

Registered Education Savings Plan

Setting up an RESP isn’t mandatory, but I would consider it a cost of raising a child in Canada. You can get $500 free every year through the Canadian Education Savings Grant. The grant gives you a 20% match on the first $2,500 you save every year until your child turns 17, with a lifetime maximum benefit of $7,200 per child. Contributions aren’t tax-deductible, but any gains would be taxable under your child when withdrawn. Since your child typically won’t have much income, the gains are usually tax-free.

Lower-income families could potentially get a higher match, and they can access up to $2,000 to help kick-start their child’s RESP through the Canada Learning Bond. The money is completely free; no fees and no additional contributions are required.

The cost of college and university is expensive. While students can apply for loans, that’s often based on family income. In other words, if you have a high family income and haven’t saved for your child’s education, there’s no guarantee they’ll get approved for a loan later.

If setting up an RESP and investing is freaking you out, consider using a robo advisor such as Justwealth. Robo advisors have low fees and automate their investment strategy. All you need to do is set up an account and choose the year your child will graduate from high school. The robo advisor will then invest and balance your RESP with that target date in mind. When you sign up for Justwealth through my referral link, you’ll get a $50 bonus.

Canadian Child Benefit

The cost of raising a child in Canada is offset by the Canadian Child Benefit, which provides up to $6,997 per year ($583.08  per month) for each eligible child under the age of six and up to $5,903  per year ($491.91 per month) for each eligible child aged six6 to 17. This benefit was created with lower-income families in mind. If you’re in a household that earns a middle-income or higher income, there’s a possibility that you won’t qualify for the Canadian Child Benefit. Some people find that unfair as they may still have to pay for childcare and other expenses, but I don’t mind the current system. Use the child and family benefits calculator to see what you’re entitled to.

Food costs

When your child is an infant, food costs will be minimal you’re breastfeeding. Of course, not everyone can breastfeed, so if you need to purchase formula, you’ll need to budget for that. Even when your kids get to preschool age, you probably won’t spend more than an additional $100 per month to feed them. 

However, every child is different. Some kids eat a lot, so your monthly grocery budget could increase quite a bit. You’ll be shocked at how much fresh fruit your kids go through. My daughter is six now, and I’m spending about $100 a month on groceries a month for her alone. That said, I have friends that are spending double that because their child eats a lot. Can you imagine how much food will cost when they’re teenagers? 

Miscellaneous expenses

The above costs are good estimates for major expenses, but many people will forget about he miscellaneous expenses that add up. You won’t need to budget for all of the following right away, but it’ll be something that you’ll want to think about.

• Haircuts
• Clothes
• Sports equipment
• Classes
• School fees (field trips, pizza lunches, etc.)
• Activity books
• Subscription programs and apps
• Car seat

Final thoughts

Having a baby is a serious decision that should be made with our finances in mind. Most parents will divert all their savings toward their children, but it’s foolish to ignore your own retirement savings in the process. While trying to budget the average annual cost of having children is nice, the reality is that the real costs will always be unknown. Married couples that have dual income will often be in a better position than a single parent. However, just because you’re a married couple, that doesn’t mean raising a child is any easier.

Even if you work while attending classes, paying for your education in full will still be a struggle. There are plenty of options in place to help students out in these circumstances including student lines of credit. So, what is a student line of credit? And what else is out there in the form of student aid? Read on to find out.

What is a student line of credit?

So what is a student line of credit and how does it work? A student line of credit is a line of credit meant for student use. A line of credit is a loan that allows you to borrow money and pay it back repeatedly, up to a set limit. So, for example, if you have a line of credit with a spending limit of $10,000 and use $3,000 of that value, you only have to pay back the $3,000 (plus applicable interest). If you haven’t yet paid back the $3,000 used, you still have $7,000 in credit. But once you pay back the $3,000 you will once again have $10,000 credit.

Student lines of credit are meant to be used for any expenses that relate to your post-secondary education. This includes things like tuition and books as well as daily expenses including food and transportation. Student lines of credit do charge interest, but the rate you’re charged is typically lower than a standard line of credit.

Who can get a student line of credit?

Student lines of credit are meant for students, but there are several criteria that need to be met in order to qualify. These will differ from lender to lender, but common eligibility requirements include:

• Proof that you are a full or part-time student in a post-secondary educational institution.
• That post-secondary institution needs to be recognized by Canada as an eligible institution.
• You must be a citizen, resident, or landed immigrant in Canada

Some lenders will also have rules regarding the length of the program you are in. Again, the requirements for getting student lines of credit vary depending on lenders so if you don’t qualify for one, make sure to check out another.

How to apply for a student line of credit

Once you have found a lender you would like to apply for a line of credit with you can start the application process. This can usually be done either in person, over the phone, or online. You may need a parent or guardian to co-sign for you. Note that this person will be responsible for your student line of credit if you do not pay it back.

The lender will set out the maximum amount of money you are allowed to borrow. This could be a pre-set number or personalized based on your situation. If the loan amount is personalized, they will consider all applicable student expenses such as tuition, housing, and expenses as well as any credit history and your ability to repay the loan.

To apply for a student line of credit you will need:

• Proof of enrollment
• Government-issues ID
• Possibly a co-signer
• You may also be asked to provide bills and expenses related to rent & tuition

Note that you can apply for a student line of credit at any time as long as you meet the qualifications.

Who offers student lines of credit?

Student lines of credit are commonly offered by Canada’s big banks. Here are five of the most popular options for student lines of credit and some details about what they offer.

RBC Student Line of Credit

RBC offers student lines of credit starting at $5,000 but the total amount will vary based on your individual needs. You will need a co-signer for an RBC student line of credit along with estimates of your education costs and a list of your financial resources. RBC will allow students up to 2 years after graduation to start paying back the principal of their loan.

TD Student Line of Credit

TD bank offers student lines of credit of up to $20,000 per year (up to 4 years) for both full and part-time undergraduate students. They also have student lines of credit for graduate and professional student programs. On top of the main documents, you will also need to bring a list of expenses with you as well as any sources of income or other financial assistance. TD Student loans also allow a 24 month grace period after graduation before borrowers need to start paying back the principal.

CIBC Student Line of Credit

CIBC student lines of credit are offered for a maximum of $60,000 through both full or part time programs ($15,000/year for full time or $7,500 per year for part-time). There is no annual limit for graduate students but the same $60,000 maximum applies. Those who have student lines of credit with CIBC have up to 12 months after graduation to start paying back the principal.

BMO Student Line of Credit

Student lines of credit with BMO allow approved individuals to borrow up to $15,000 in the first year and then $10,000 in each remaining year up to a maximum loan of $45,000 spread over the course of 4 years. You must start repayment of the principal 2 years after graduation. A BMO student line of credit is available to both full time and part-time students so long as the program is at least 12 weeks long and hours per week and you will need a co-signer.

Scotiabank Student Line of Credit

The value of student lines of credit with Scotiabank vary depending on your studies. Undergraduates can get up to $80,000 maximum while graduate students can get up to $160,000. There are also options for individuals who are partaking in a certificate of apprenticeship program and those pursuing a professional degree. Once you have graduated, you have a one-year grace period before you need to start paying back the principal amount on your Scotiabank student line of credit.

How to use and pay back a student line of credit

Once you have been approved you can access your student line of credit through the usual methods; visit a branch of the bank you borrowed from, withdraw money via an ATM, or use online banking. Make sure to follow the terms and conditions set out in your agreement and only borrow what you need.

As for paying back student lines of credit, you need to pay at least the interest while you are studying (although you can pay back more if you can). Once you have graduated, the majority of institutions will allow you a grace period of 6-24 months where you can continue the interest-only payments. However, after this point, you’ll need to start paying back the actual principal as well as the interest until the student loan is completely paid off.

Student aid & other options

Student lines of credit can be very helpful for Canadians getting an education, but they shouldn’t be your first resort. If your parents set up a Registered Education Savings Plan, you should use that first since it’s money already saved.

However, if you’re not fortunate enough to have funds from your parents, look to student aid instead. Student aid in Canada can come in the form of grants, scholarships, and government loans. Grants and scholarships do not need to be repaid. Government loans do, however, most only need to start being paid after you complete your education. The Government of Canada offers plenty of options for grants, scholarships, and loans so it’s worth doing your research and applying. You can learn more about student aid here.

Basically, an RESP is a a type of account that can be used to help you save for your child’s education. As an added incentive, the government gives you an RESP grant of 20% of your contributions. There’s also some tax benefits which is why an RESP is the best way to save for your child’s post secondary education.

Registered Education Savings Plan Rules

When it comes to setting up your Registered Education Savings Plan, there are some basic rules you’ll want to understand.

• An RESP can be set up for any “beneficiary” including your children, grandchildren, or family friends
• The beneficiary must be a Canadian resident and have a Social Insurance Number
• There’s a lifetime RESP maximum of $50,000 per beneficiary
• You can get a 20% match up to $500 per year thanks to the CESG
• You can contribute to an RESP up to 31 years and the plan can remain open for a maximum of 35 years
• An RESP can hold a variety of investments including mutual funds, ETFs, stocks, bonds and GICs
• Capital gains are tax-free while it is in your RESP
• You do not get a tax refund for RESP contributions
• Money withdrawn from the RESP as an Educational Assistance Payment is taxed in the hands of the beneficiary

Although some people think the RESP rules can be complicated, as you can see from above, it’s pretty straightforward. I realize some of you may still be confused, but I’m going to breakdown things even further so you really understand how RESPs work.

Types of RESP in Canada

When I refer to the types of Registered Education Savings Plan, what I mean is the type of plan you get create or setup. These are the three types of RESPs in Canada you need to know about:

Non-Family Plan

When setting up an RESP for their first child, most people opt for the non-family plan. By doing this, the RESP is managed for the individual child. What’s nice about this option is you can set your investments to line up with the timeline of the beneficiary without having to worry about your choices affecting any other beneficiaries.

Family Plan

Some parents like family plans since it allows multiple beneficiaries as long as they’re related by blood or adoption by the subscriber (the person who set up the RESP). With this type of plan, you’re dealing with one big pot of money so you can allocate funds as needed. However, since you’ll have multiple children in the plan, you may need to be more conservative with your investments.

Group Plan

In my opinion, group plans should be avoided. They’re attractive since they can give your children a defined payout, but there are so many conditions and rules that there’s no guarantee you’ll get what you were promised. Seriously, if you google RESP group plans in Canada, you’ll probably quickly find many horror stories.

RESP investment options

As mentioned above, your Registered Education Savings Plan is basically an investment vehicle which allows you to put a variety of investments within the account such as:

• GICs
• Bonds
• Mutual funds
• ETFs
• Stocks

Since this is for your child, many people think investments that aren’t risky are the way to go. That’s a good thought, but if you set up your child’s RESP when they’re born, it’ll be 16-18 years before they need that money. That’s plenty of time to grow your child’s RESP so you have a balanced portfolio to reflect that time line.

Do-it-yourself investors won’t have an issue with this, but people who are new to investing may be a bit terrified about all of this. As a result, most investment firms have a mutual fund option which automatically re-balances the portfolio based on your child’s estimated first year of their post-secondary education. This is a decent option, but the management expense fee is typically 2.5% or higher which is quite expensive.

Another (and likely better) option is to use a robo-advisor that does the same thing but charges much lower fees. I like Justwealth’s RESP portfolios since they use target dates but charge much lower fees compared to many other financial institutions. Clients will be charged the minimum monthly fee of $2.50 per month OR the 0.5% annual fee (never both), whichever one is greater.  To help you get started, you’ll get $50 for free when you open an RESP with Justwealth via my referral link.

Canadian Education Savings Grant (CESG)

What really makes an RESP appealing is the RESP grant which is formally known as the Canadian Education Savings Grant or CESG. This grant gives the beneficiary a 20% match up to $500 per year. That means if you contribute $2,500 per year to your child’s RESP, you’ll get another $500 for free. Alternatively, if you contributed $2,000, your child would get $400.

The government realizes that you may not have $2,500 just lying around every year so they allow you to carry the grant over for one year. In other words, you can skip contributions one year and then make a deposit of $5,000 the next year and still get the full $1,000 CESG grant ($500 X 2). As you’ve probably guessed, you can’t contribute $25,000 one year and then expect to get 10 years worth of RESP grants.

Keep in mind that there’s a lifetime CESG grant of $7,200 up to the age of 18 so your child could reach that limit when he or she is 14 if you opened an RESP the year they were born.

RESP grant for lower income families

As an added incentive, lower income families can get up to an additional $100 each year from the CESG. Families with a household income under $50,197 get a 40% match on the first $500 in RESP contributions and then 20% on all contributions up to $2,500. That would give them a yearly RESP grant of $600

If your household income falls between $50,197 and $100,392, then your beneficiary would get a 30% match on the first $500 contributed to their RESP. All other contributions up to $2,500 earn you a 20% match. Families in this circumstance would get a total of $550 per year from the CESG.

As an additional incentive, low-income families may qualify for the Canada Learning Bond. This program gives your child up to $2,000 in RESP contributions without you having to deposit any funds.

Note that the income brackets change yearly based on the adjusted family net income level shown on your tax return for the previous tax year. Regardless of your income, the lifetime CESG limit is $7,200.

RESP Withdrawal rules

When your child is ready to make RESP withdrawals, there are two scenarios to consider:

When the funds are used for their education – Upon enrollment of a qualifying post-secondary school, you can withdraw funds from the RESP as long as you can provide proof of enrollment. Any payments made including the grand and/or bonds are referred to Educational Assistance Payments (EAPs) which the student must claim as income when they file their taxes. Since most students will have little to no income, the money withdrawn from their RESP is usually tax-free. You can even use your RESP if you’re studying abroad.

When the funds are withdrawn and not used for education – If your child decides not to continue their education, you can still withdraw your initial contributions without having to pay any taxes. That being said, any interest and capital gains (known as accumulated income) will be taxed at your income level, plus another 20%.

In addition, you can transfer the CESG from the child who is not continuing their education to a brother or sister if they have grant room available. If this isn’t an option, the CESG and any bonds must be returned to the government.

When you finally close the RESP, you can reduce the amount of taxes you pay by transferring your accumulated income (up to $50,000) to your or your spouse’s RRSP. This is only possible if you have enough contribution room. For more details on what happens to unused RESP? Check out this post.

Final thoughts

If you want to help your child with their post-secondary education, there’s no better way than setting up an RESP. The 20% match you get from the CESG is free money and it’s guaranteed! Even if your child decides not to continue their education, you won’t lose the money you initially contributed. Use my Justwealth referral link now and get $50 when you open an RESP with them.

Mydoh is easily the best app I’ve seen on the market that allows parents and kids to talk about money in a fun and meaningful way. While some people think using an app to talk to their kids about money is counterintuitive, I think it’s one of the best ways to connect with children of all ages since it gives kids the independence they crave while allowing parents oversight.

Read my Mydoh review now and find out how the app gives kids the independence they crave while allowing parents oversight.

What is Mydoh?

Mydoh is a money management app and Smart Cash Card, which comes with a digital and physical Visa* Prepaid Card. It allows kids to earn and spend money while learning values that will help them build a strong financial foundation.

The app is backed by the security and trust of RBC, but it’s available to customers of any Canadian bank.

Mydoh was built to create a more accessible, inclusive, and effective financial ecosystem for all Canadians. It allows children to learn important earning, saving, and spending habits that will help them manage their own money for life.

When you sign up for a Mydoh account, up to two parents and five kids can participate at the same time. Sign up with promo code ‘SMART15‘ and get $15 in your account.

How does Mydoh work?

Mydoh is broken down into two accounts. You have one for parents, and one for kids.

Under a parent account, you’d be able to manage all of the activity including:

• Setting up tasks and allowances
• Sending your kids money
• Tracking earned and spent money
• React to spending decision
• Lock and unlock the included Mydoh physical card

For kids, they’d be able to do the following under their account:

• Manager their tasks
• Mark tasks complete
• Spend money earned with their virtual or physical Smart Cash Card
• Track money earned and spent
• Set up savings goals
• Learn money basics via games

Essentially, Mydoh is a virtual version of giving your kids an allowance and extra money when they perform tasks. While some parents are against the idea of giving their kids money to do chores, it’s similar to a job when you think about it. You perform a task, and you get paid. That’s how real life works.

From the parent’s perspective, they can send their kids reminders to perform tasks directly through the app. When kids perform the tasks assigned to them, they’ll get paid on Pay Day, which is every Saturday.

Since kids get a Smart Cash Card, which is basically a prepaid Visa card, they can make purchases whenever they like. At the same time, parents can see what purchases have been made and limit how much is being spent.

How much does Mydoh cost?

A Mydoh subscription is free for the first 30 days for two parents and up to five kids. Once your trial ends, it’ll cost $2.99 per month.

The 30-day free trial offer is activated on the date of completion of the Mydoh mobile app account registration process. After your free trial offer ends, a monthly subscription fee of $2.99 will be taken out of your Mydoh Wallet. You can cancel any time by contacting Mydoh. Mydoh reserves the right to cancel, modify or withdraw this offer at any time.

Admittedly, some people will find that price to be a bit much when they could just talk to their kids about money for free. But here’s the thing, kids don’t always respond to their parents well, and as a parent, you may have to constantly have to nag your kids to get tasks completed. The time you waste is worth much more than $2.99 a month.

Also, don’t forget that there’s a Mydoh physical card included that allows parents to oversee what their kids spend money on. That alone is likely a better value than just giving your kids a supplementary credit card.

Educating your kids about financial literacy with Mydoh

In this Mydoh review, I’ll cover the different tools that make learning about money more fun. Not only can kids see their money grow, but they can learn about different financial concepts, such as the cost of living and debt.

Savings goals

Kids can set up savings goals within their Mydoh account. For example, they can set up a savings goal for new shoes. While this concept is pretty straightforward, it’s more fun with the app.

Since every dollar spent will lengthen the time for kids to reach their goals, kids are forced to think about saving instead of spending. They’re essentially learning money concepts such as needs vs. delayed gratification.

Having a visual representation in the app goes a lot further since they’ll be promoted to save instead of spending impulsively.

Mydoh play

Mydoh play is where kids can learn about financial literacy through quick and easy to understand trivia. By introducing your kids early to money concepts, they can take what they learn and apply it to real-life situations that occur as they reach adulthood.

Since the facts are short, it’s a fun way to get kids to think about money. Mydoh covers various topics such as budgeting, housing, and the psychology of money. What’s interesting is that parents can see which lessons their kids are on or have completed. Since you’ll know they’ve recently read about certain topics, you can open up the money conversation as a family.

Mydoh alternatives

To be honest, there really isn’t a Mydoh alternative. Sure, there are some budgeting/money management apps such as Mint and YNAB, but those are more aimed at adults, and they need to link to your bank account.

There are also a few prepaid credit cards that give you spending insights, but those are also aimed at adults. Mydoh was built specifically to allow parents to teach their kids about money through an app while providing a prepaid card to which money can be sent to.

Final thoughts

My Mydoh review is positive. In my opinion, no better app helps parents teach their kids about financial literacy. Having a Mydoh Smart Cash Card is essential since it allows kids to spend money while giving parents oversight. Of course, since the app is always encouraging kids about financial literacy and saving, parents can sleep well knowing that their kids are building a solid financial foundation. Sign up with promo code ‘SMART15‘ and you’ll get $15 for free.

Mydoh

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• $15 Welcome bonus when using promo code ‘SMART15’
• subscription-free for the first 30 days
• $2.99 monthly fee
• Visa prepaid card included
• Savings goals

There is no catch to the CLB. As long as the parents open an RESP for their children, the government of Canada will provide them with the bond every year as long as they meet the eligibility requirements and don’t exceed the maximum amount. 

What is a Registered Education Savings Plan?

Without a doubt, a Registered Education Savings Plan is the best place to save for your child’s future education costs. That’s because any capital gains or income earned is taxed in the child’s name when they eventually withdraw the money for educational purposes. The presumption is they’ll be in a lower tax bracket at that time compared to the parents who contributed to the account.

In addition, when you contribute to an RESP, you may be eligible for the additional Canada Education Savings Grant (CESG), which provides extra financial support. I’ll go into those details further below.

To be clear, once the money is in an RESP, you still need to invest it. By doing this, the money will hopefully grow, so your child will have access to more funds when they finish high school.

What is the Canada Learning Bond?

The CLB is a Canadian government program that provides low-income families with a financial boost so their eligible children can pursue full-time or part-time studies at the following:

• Apprenticeship programs
• CEGEPs
• Trade schools
• Colleges
• Universities

What makes the CLB appealing is that, unlike the CESG, parents do not need to contribute any funds to an RESP to get the CLB. They simply need to open an RESP on behalf of an eligible child and meet the eligibility requirements.

How much does the CLB pay?

You can get up to a maximum of $2,000 in CLB payments as long as your child pursues a post-secondary education. The breakdown is as follows:

• $500 in the first year of eligibility
• $100 each year the child is eligible until they turn 15

So assuming the child qualifies every benefit year, you can max out the CLB funds after 15 years.

CLB eligibility

The Canada Learning Bond eligibility is based on the following:

• You’re from a low income family
• You’re born on or after January 1, 2004
• You’re a resident of Canada
• You have a valid Social Insurance Number (SIN)
• You are named in an RESP

As for the low income eligibility amount, it’s based on the following:

• Number of children in the family
• Adjusted income of the primary caregiver, including the income of a cohabiting spouse or common-law partner

The net income requirement is updated every year, so you should check the government of Canada website for the most updated info. As an example, for July 1, 2022 to June 30, 2023, free CLB money was available for families that have 1 to 3 children and an adjusted income level equal to or less than $50,197.

How to apply for the CLB

To complete your application for the Canadian Learning Bond, you need to do the following:

• Gather all relevant personal information – This would include you and your child’s SIN number. If the subscriber (the person who opened the RESP) is not the child’s primary caregiver, you’ll need their SIN too.
• Open an RESP – Setting up an RESP takes just a few minutes. Once set up, they can fill out the application forms to process the CLB.
• Wait for the deposit – Once the application is approved, the Canada Learning Bond will usually be deposited within four weeks.

Remember, you don’t need to make any contributions to the RESP to qualify for the CESG. In addition, once the money is in the account, be sure to invest it.  

Who should apply for the CLB?

If you meet the net family income requirement for the CLB, there’s no reason you shouldn’t apply. You’re literally getting free money from the government. 

Even if you think your income will go up in the future, or you currently don’t meet the income thresholds, you should consider opening an RESP since it’s the best way to save for your child’s future education costs.

Small contributions go a long way. Let’s say you contributed $20 a month from the day your child is born until they turn 17. When factoring in the CESG, and a 5% yearly return on investments, they’d have a total value of about $7,000.

What is the Canadian Education Savings Grant?

The CESG is an additional government incentive that provides a 20% match on RESP contributions up to $500 a year. That means if you contribute $2,500 each year, you will get the full CESG. The lifetime maximum for the CESG is $7,200.

However, it’s worth noting that if you qualify for the Canada Learning Bond, you’d also get up to an additional $100 from the CESG. That means when you combine the CESG and CLB, low income families could get up to $700 in grants each year. Of course, that’s easier said than done since it would require you to contribute funds to an RESP.

What happens if the RESP is not used?

Not everyone will decide to pursue post-secondary education. If this were to happen, CLB and CESG contributions would be returned to the government. Any personal contributions would be returned to the person who opened the plan. 

Note that you don’t have to close an RESP until the 36th year after it’s opened, so there’s no rush to shut it down.

How to open an RESP

Opening an RESP is easy as you would only need the following information:

• SIN for yourself
• SIN for your child

Since you can get a SIN right when your child is born, you can set up an RESP almost immediately.

Just go to a participating RESP promoter, as they can help you set up an RESP. As mentioned, the Canada Learning Bond will take a few weeks to deposit into the RESP. Once it’s in there, you can invest the funds.

Don’t worry, your financial institution can recommend an investment strategy suited for your child. If you want to keep your fees down, so your child can potentially end up with more money, consider using a robo advisor such as JustWealth.

How does the Canada Education Savings Grant work?

The Canada Education Savings Grant is a government grant that contributes to a child’s RESP to help families save for post-secondary education. The program is run by Employment Social Development Canada and is an incentive program. Essentially, when a parent, family member or friend makes a contribution to a child’s RESP then the government will make a contribution as well.

The money in the RESP can then be used for full or part-time studies in a post-secondary educational institution. This includes college, university, trade school, CEGEPs, and apprenticeship programs. If the child does not pursue post-secondary education, then the CESG money is returned to the government. (To learn what happens to unused RESP read this article.)

It’s also worth pointing out that this money is not tax-free. You will have to pay tax on the CESG upon withdrawal. However, since it will be a student withdrawing the money, chances are there will be no tax owed or the amount will be very little.

Canada Education Savings Grant eligibility

The great thing about the Canada Education Savings Grant is that everyone qualifies for it. Income level doesn’t matter. Now, there are two types of CESG based on income level, which I will touch on here in a second, but in general, your income does not play a part in qualifying for this grant. The CESG is for everyone.

To qualify for CESG the child must meet three requirements.

1. He/she must be a Canadian resident
2. He/she must have a valid social insurance number (SIN)
3. He/she must be named as the beneficiary in an RESP

Then, of course, family and/or friends will need to make contributions to the RESP in order to receive the CESG.  

Since CESG is meant for long-term savings there are a couple of additional rules for children aged 16-17. In order for this age group to qualify for the grant, you need to meet these two requirements.

1. There must be a minimum of $2,000 contributed to (and not withdrawn from) the RESP prior to the end of the calendar year in which the child turns 15.
2. A minimum annual contribution of $100 must be made (and not withdrawn from) the RESP in any of the four previous years.

How much can I get from the Canada Education Savings Grant?

As I mentioned above, all income levels qualify for CESG but there are two types. Basic CESG for everyone and additional CESG for those who have a lower income.

With basic CESG, you will get 20% of the annual RESP contributions up to $500 per year*. With the additional CESG, an extra 10-20% will be added on, depending on income level. That means if you contribute $2,500 each year, you’ll get the maximum $500 grant. Lower income families get the additional 10-20% based on the first $500 contributed.

The maximum lifetime amount of CESG a child can earn (for both basic and additional) is $7,200. Basically, if you contribute every year from when your child is born, you’ll max out the grant in 14 years.

*Note that you can carry over the unused room if you are unable to max out the annual contributions. In this case, the maximum annual CESG you can earn would be $1,000.

How do I apply for the Canada Education Savings Grant?

Applying for the CESG is very easy and pretty straightforward. When setting up an RESP, all the documentation for the CESG is filled up at the same time. Beyond the SIN and all the standard information on the child, there’s nothing else to add. Note that if you are not the primary caregiver or spouse/ co-habiting common-law partner of the primary caregiver, there will be a second form that needs to be filled out by that individual as well. It’s called the Annex B form and can be found online here.

Once the CESG form is filled out, it’s tied to the RESP. That means whenever you make a contribution to the RESP, the CESG will automatically be paid out. CESG deposits usually take 4-6 weeks after the contribution is made to appear in the RESP account. The frequency of the CESG deposits depends on your contribution schedule. So, for example, it could be annually or monthly depending on how often you contribute to the RESP.

Technically speaking, the grant is paid out in cash, but some financial institutions will automatically invest it for you if you’ve authorized them to do so. If you’re managing the RESP on your own, then you’ll need to purchase securities on your own when the CESG shows up.

One of the best places to set up an RESP is Justwealth. They’re one of Canada’s best robo advisors and have target date portfolios that are ideal for RESPs. You basically choose the year your child will start their post secondary education, and Justwealth will invest on your behalf. The portfolio is automatically rebalanced, so there’s nothing to do on your end but to make regular contributions.

Other RESP Grants

The Canada Education Savings Grant is a great incentive to get family and friends to save early for their child’s education. However, it also assumes that these individuals are in a place where they can financially afford to do so, which is not always the case. If you are unable to contribute to a child’s RESP on your own, then consider the Canada Learning Bond (CLB).

What is the CLB?

The CLB is a government program dedicated to helping those from low-income families. The government adds money to a child’s RESP without the requirement that friends/family contribute as well.

Eligibility is based on the adjustment income of the primary caregiver & partner (if applicable) as well as the number of qualified children in the family. Each child is eligible for a maximum of $2,000 CLB; $500 for the first year of eligibility and $100 each year that the child continues to be eligible (up to age 15).

To apply for CLB, open an RESP with a recognized RESP promoter. They will have the application forms and be able to help you with the process. Note that you do not need to have a bank account to open an RESP and you do not need to make personal contributions to the RESP in order to qualify for CLB.

Final thoughts

Education is important but it’s definitely not cheap and, unfortunately for us parents, it just seems to be getting even more expensive. Opening an RESP for your child is the best way to save for your child’s education and the CESG is essentially free money. For more tips on how to save for your child’s education, read this article.

The first thing you need to know is that there is no reason to freak out. Yes, there will be tax implications, but having too much money in your child’s RESP is a lot better than not enough. What you end up doing with that unused RESP depends on what options you have available to you so let’s take everything into consideration.

RESP Withdrawal rules

If you didn’t know, your RESP can remain open for 36 years so you need to close it by the 35th year after opening the account. This is good because some children may not immediately pursue a post-secondary education immediately after high school or they may decide to pursue further education after they get their first diploma or degree.

Although your RESP is one lump sum, it’s actually made up of three different parts:

• The principal (the money you’ve put in)
• The CESG, Canada Learning Bond (CLB), and any provincial grants
• Income e.g. interest, dividends and capital gains made on the above two parts

Eligible withdrawals from the principal are tax free which is why it’s sometimes referred to as a capital withdrawal. You don’t pay tax on this since you were already taxed on that amount before you deposited it into an RESP.

However, a non-capital withdrawal is taxable and depending on the situation, it might have to be repaid to the government. The taxable grants and income are taxed under the beneficiary but since they typically have a low income, they usually don’t pay much in tax at all. These types of withdrawals are known as Education Assistance Payments (EAPs)

Transfer the money

If you have more than one child, you can easily shift any unused money within the RESP to another beneficiary. You can also add siblings of the original grant recipient as a new beneficiary since government grants would still apply to them. Another option is to transfer the money to a niece or nephew where you wouldn’t pay taxes on the Accumulated Income Payment (AIP).

You also have the option to transfer any investment income made within the RESP up to $50,000 to your RRSP as long as you have the contribution room. This $50,000 sum can be split between both parents in any way. You don’t need worry as much about what happens to unused RESP when you have transfer options.

Collapse the RESP

Depending on the situation, it may make more sense to withdraw any unused RESP right away so you might as well get on with it.

Any unused government grant money such as the CESG, CLB and provincial grants must be repaid to the government. This seems unfair to some people, but that grant money was meant for the beneficiary’s post-secondary education. If they’re not continuing their studies, I think it’s pretty reasonable for the government to want their money back.

You’ll now be left with the Accumulated Income Payment portion of the RESP which is fully taxable. Not only will you be taxed at your marginal rate, but you’ll pay an additional 20%. If you’re in a high tax bracket, you could be pay paying 70%+ in tax which is insane.

Talk to a financial planner

If you’re not sure what happens to unused RESP, you could talk to a financial planner. Although having too much money in your child’s RESP is a good problem to have, you do want to have some kind of withdrawal plan in place so you can minimize taxes. Generally speaking, most people won’t run into serious tax issues unless the RESP has a lot of money left over and the parents have no RRSP contribution room left.

That said, remember, you can keep the RESP open up to 36 years. Even if you currently lack RRSP room, you could rebuild the room by not making any RRSP contributions for a few years. This requires a bit of timing and planning which is why you really do need to talk to a financial planner. 

Set up your RESP now

In case you haven’t set up your RESP yet and you’re simply reading about all the details, you’ll want to set one up for your child now. There are so many different ways you can set up an RESP with various companies but I personally prefer JustWealth since they have portfolios that will line up with your child’s education timeline.

Besides easy account maintenance, they’ll take care of the 20% match you get from the CESG so you can rest easy knowing that the money being put aside for your child’s education is being professionally managed. You can read my Justwealth review now for more details or use my Justwealth referral link and get $50 when you open an RESP with them.

I know that’s easier said than done and they want to give everything to their children, but that’s not always possible. Follow these tips on how to manage your money as a new parent and you’ll be spending more time with your child and not worrying about your finances.

Redo your budget

If you haven’t already, it’s time to redo your budget. You’ll likely know to adjust your income and to add any expenses related to the baby but you may want to budget a little more for unexpected expenses that will come up. Many people also forget to budget for their child’s Registered Education Savings Plan (which I’ll touch on below) which could increase your budget by quite a bit. Don’t forget to cut expenses too, the odds are you won’t be eating out as much and you may need to reduce your vacation budget temporarily.

Don’t pick up new debt

Babies can be expensive which is why you don’t want to pick up any unnecessary debt. Avoid purchasing the best of every product such as strollers and cribs since they’re high ticket items. The money you save can be put towards other expenses. I’m not suggesting you need to cheap out on everything, but you want to be smart about where you’re spending your money. Some parents also get FOMO when they see other kids with certain items or clothes. Everything you buy doesn’t need to be new. Baby clothes and baby accessories are some of the best things to buy used since they’re usually like new and heavily discounted.

Adjust your shopping habits

I know some people who refused to shop at discount grocery stores or at Wal-Mart because it was below them. I’ve got news for you, those stores often sell the same product as other stores but they’re often much cheaper. Where you shop can make a huge difference on your wallet especially if you combine it with loyalty programs and credit cards. For example, I shop at No Frills a lot which is much cheaper than Whole Foods. I’m also a member of PC Insiders which gives me more PC Optimum points on select items. I then pay with my PC Financial World Elite Mastercard which gives me points on every purchase. Those points are incredibly valuable since I can redeem them for free groceries or merchandise.

Anticipate future expenses

Having an updated budget and adjusting your shopping habits is great, but you also need to factor in future expenses. That could be anything from birthday parties for your kid to saving a down payment for a home purchase. These expenses may not seem random, but many people don’t anticipate them and then run into cash flow problems when it’s time to pay. Having multiple high interest savings accounts has worked for my wife and me since we’re able to save for various things at the same time. By separating everything, we always know what our budget is.

Set up a RESP

Before our daughter was born, my wife and I knew we wanted to set up a Registered Education Savings Plan (RESP) for her. We both value education so we wanted to make sure she had some money available to her if she decided to pursue a post-secondary education. The great thing about RESPs is that you can get a 20% match up to $500 every year from the government thanks to the Canadian Education Savings Grant. This is essentially free money! To learn more about RESPs and how to set one up, read my RESP guide now.

Think about your long-term income

It’s impossible to predict what will happen in the future but you should at least think about it. If one parent plans on staying home for the first few years, then you’ll likely want to start adjusting to life on a single income now. If money is already tight, perhaps one parent will return to work early or on a part-time basis. If that’s the case, see if you have family that can help with childcare. Now is also a good time to think about your future. Do you want to return your job? If not, take the steps to shift your career or to look for a new job.

Use the right credit card

When used responsibly, credit cards can be a useful tool. For example, if you currently hold a balance on your credit card, it may make sense to do a balance transfer to a low-interest credit card since you’ll end up paying less in interest. I already mentioned how a store credit card can help you earn more points, but some of the best cash back credit cards in Canada are also a great option since you’ll earn money back on all your purchases. You basically want to use a credit card that benefits you, but this only works if you’re paying off the full balance every month.

As soon as Scarlett was born, I took immediate steps to set up her Registered Education Savings Account (RESP). I knew that this was the best way to save for her post-secondary education since the Canadian Education Savings Grant (CESG) would match my contributions by 20% up to a maximum of $500 a year. There’s honestly no better guaranteed return out there since it’s literally free money.

To maximize the grant, my wife and I would have to contribute $2,500 a year to Scarlett’s RESP. That’s a lot of money and for many people, putting that much money aside for something that will take place many years away can be difficult.

Parents are constantly juggling the finances that affect them now, so how do you prioritize your child’s education? I’ve got a few tips that will put you and your child on track.

Watch your spending

Personal finance writer David Bach coined the term “latte factor” almost two decades ago when a cup of the drink was only $2-3. These days, a latte at a fancy coffee chain or independent shop is closer to $5-7. If you purchased one of those drinks or an equivalent amount of snacks every day during the work week, you would be spending $1,300-$1,820 a year. That’s insane when you think about it. The amount you spend on coffee alone could cover more than half of your RESP for a single child every year! I’m not even counting additional spending you could cut such as eating out, magazine subscriptions, excessive amounts of makeup, etc. I’m not suggesting you need to cut out all the fun, but think about your priorities.

Buy and sell your stuff via the second-hand economy

For many people, buying new is the natural thing to do, but according to Kijiji’s 2018  Second-Hand Economy Index, you could save an average of $825 per year when buying second-hand. When you add in the fact that a person can earn an average of $1,134 per year by selling items in the second-hand economy, that’s nearly $2,000 back in your pocket. I personally have sold many items online on Kijiji since it’s the #1 channel for buying and selling second-hand goods. I’ve bought and sold some of the top categories in the second-hand economy, like baby accessories, furniture, and entertainment items. What I try to do is buy gently used items for Scarlett and then when she’s done with them, I put them back up for sale on Kijiji where I can recuperate much of my costs – so far, I’ve earned about $650 from selling this year. With an average of two new ads posted on Kijiji every second, I haven’t had much trouble sourcing items that I need. The key thing is to take that money you’re saving and invest it in your child’s RESP.

Make your savings automatic

For some people finding $2,500 a year isn’t a huge issue, but coming up with it all at once may be a problem. If this applies to you, then set up automatic monthly deposits instead. Regardless of who you set up your child’s RESP with, they’ll be able to automatically withdraw money from your account so you don’t even need to think about it. To maximize the grant, you need to set aside about $210 (or $105 per person in dual-income households) a month which is a reasonable amount to handle. One trick I like to use is to set my automatic payments to take place the day after I get paid. This way, the money is gone before I even notice it so I’m never tempted to spend it.

Don’t be afraid to get others involved

As soon as Scarlett was born, I made it quite clear to friends and family that we much preferred cash gifts that would be used for her education instead of toys if they planned on gifting her anything. Don’t get me wrong, any gift was greatly appreciated, but I knew that funding her education was more important than any physical gift and most people agreed. This may seem tasteless to some, but I believe that my friends and family felt comfortable with this request since they knew the money wouldn’t be wasted on other things. It can be difficult to make a cash request, but I do think talking to those close to you and explaining how that money will be used will go a long way. It also likely helps that I have no problem giving cash gifts to my friend’s children.

Have a goal in mind

The cost of college and university seems to increase every year so it’s important to have a goal in mind when you’re saving for your child’s education. Roughly estimate how much it’ll cost to fund their post-secondary education and then talk to your financial advisor so you know how much you need to set aside to reach that goal. For some people, putting aside that much money may not be possible, but that’s okay. Come up with a number that works for you and save accordingly; your child will be thankful regardless of how much you saved for them.

Final thoughts

Saving for your child’s RESP can be difficult but it can be done with some small sacrifices and adjustments to your budget. Don’t forget, the money that you put into your child’s RESP gets invested so it could potentially be worth a lot more than what you initially deposited by the time they’re ready to start college or university.

As the year comes to an end one thing that I’m really proud of is how I was able to use the second-hand economy to make and save money. Admittedly, since I was working with Kijiji throughout the year, I put a little more effort into buying and selling things online, but despite this, using these resources really showed me what a difference some small changes can do to my finances.

According to Kijiji’s 2018 Second-Hand Economy Index Report, Canadians can save an average of $825 per year buying second-hand vs. new. They can also earn an average of $1,134 by selling their second-hand goods. I actually saved even more than that this year but came up a bit short on the selling end of things. Keep reading to learn how much I saved and earned and what I plan to do with the money in the future.

How much I saved and made with the second-hand economy

If you’re a regular reader, you’ll know that I’m a relatively new dad (well my kid is 17 months old now), so a lot of my expenses have been related to the baby. By sourcing second-hand items throughout the year, I was able to save about $850. Many people will think that it took a lot of effort, but it really didn’t. According to the 2018 Report, baby accessories are one of the most popular categories in the second-hand economy, so finding items did not take much time at all. I was able to get a travel crib, toys, a rocking chair and some instruments within hours of searching for the items. Baby accessories can be expensive, but when you shop via the second-hand economy, it’s not that hard to find them for at least 50% less when buying them gently used on Kijiji.

As for selling, I try to get rid of things I no longer need. As soon as my child outgrew some of her things, I put them up for sale online. Many of these items I had purchased second-hand to begin with, so I often broke even or took a small loss. We also had a lot of luck selling some furniture (that weren’t baby safe), which put a few hundred dollars back in our pockets. I also got rid of some old sports memorabilia, action figures, and video games which I had collected in my younger days. In the end, I was able to sell and earn about $900 from my stuff which I likely would have thrown out or given away.

Why changing your money mentality matters

To be honest, I was a bit surprised at how much I saved and made but considering that $28.5 billion was spent in Canada via second-hand transactions last year, I really shouldn’t have been shocked. At the start of the year, I thought it would be difficult to save or make money by using the second-hand economy but that was more of a myth.

If you want to improve your finances, you need to try a few different things to see what works for you. It wasn’t that long ago where I thought tracking your expenses was a waste of time, but now it’s the first thing I tell people to do since it’ll help them get a grasp on their spending. I also thought investing was difficult, but now I manage my own portfolio.

It doesn’t matter if you cut back on eating out or start selling some things online, small things can add up and improve your financial wellbeing.

What I’m doing with the money I’ve saved

Overall, I ended up putting $1,750 back in my pocket by selling and buying items in the second-hand economy and on Kijiji this year alone. That’s obviously no small amount but let me put that into perspective for you.

My wife and I are already looking at our travel plans for 2019 and one of the destinations we are considering is Europe. We’re estimating that our flights will cost us $850 each so the money we’ve saved this year will easily cover our two tickets. This is especially handy since there’s a good chance we’ll be travelling after my daughter turns two, which means we’ll have to pay for her seat too.

Second, if we put the money we’ve saved towards my daughter’s Registered Education Savings Plan (RESP), she would get a match of $350 thanks to the Canadian Education Savings Grant. That would give her a total of $2,100 to put towards her post-secondary education for the year when she’s older.

Lastly, I could also use that money to make a contribution to my Registered Retirement Savings Plan (RRSP) and get a tax refund of about $720 since I’m in a high tax bracket.

As you can see, any of the three options above would be good, but I could turn that $1,750 I saved and make even more money if I deposited it into Scarlett’s RESP or my RRSP.

Final thoughts

It can be tricky to save or make money which is why sometimes you need to think about the tools available to you. Kijiji is Canada’s #1 channel for buying and selling second-hand, which makes it a great resource if you’re looking to buy or sell something specific. What you do with the money you’ve saved and made is up to you, but it’s clear that if you put in a little bit of effort, you can reap the rewards.