The Canada Child Benefit, which was promised by Justin Trudeau during the last federal election, has officially rolled out. The program replaces the Child Care Benefit and is clearly targeted at low to mid-income families since the payouts are higher. That being said, higher income families will most likely see a notable hit.
So what do parents plan on spending this extra money on? 37% of parents felt that day-to-day expenses were their top priority, followed by 22% who planned to use the benefit for their child’s post-secondary education while 16% would use the money for childcare, this according to a recent poll from Knowledge First Financial. Other planned spending included extra activities (14%), family vacations (5%), and 6% for other purposes.
What is the Canada Child Benefit
Under the previous government, the child care benefit consisted of three parts: the Universal child care benefit, the Canada child tax benefit, and the National Child benefit supplement.
The full details of the Canada Child Benefit is available on the Government of Canada website but here’s a quick breakdown of the payouts.
- Each child under 6 – $6,400 per year (tax-free)
- Each child 6 to 17 – $5,400 per year (tax-free)
Depending on your household income, reduction tiers do apply.
|Household Income||One child||Two children||Three or more children|
|$0 - 30,000||No reduction||No reduction||No reduction|
|$30,001 - $65,000||6.8%||13%||16%|
|$65,001 or more||3.1%||5.5%||8%|
Income tiers are what determines your reductions. The 6.8% reduction for single child families only applies to the income between $30,001 – $65,000. Any income above that will see a 3.1% drop. The more children you have, the more reductions you’ll see.
Families with high incomes could end up getting nothing from this new program but the Government believes they’ll be okay without the benefit.
Use the Canada Child Benefit online calculator to see what you’re entitled to.
Maximizing your Canada Child Benefit
If you haven’t set up a Registered Education Savings Plan (RESP) for your children yet, now is the time. The Canadian Education Savings Grant (CESG) is a Government of Canada program that will you a 20% match up to $500 for every dollar you save in your child’s RESP.
That means if you put in $2,500 into your child’s RESP, you’ll get the maximum benefit. Day-to-day expenses aside, you could essentially use the Canada Child Benefit to fund your child’s RESP and then get the extra match from the CESG. It’s a win-win for you (and your child).
According to the poll, 37% of parents are interested in using the new Canada Child Benefit to further fund their child’s RESP. 36% of parents current don’t have an RESP but do believe the CCB could help with their child’s education. Another 11% have an RESP but won’t be using the CCB to help fund it.
The new Canada Child Benefit is great for parents but high-income families will be disappointed that they may not get anything at all. I’m sure they’ll understand when you look at how much it benefits lower families. If you haven’t started an RESP for your child, now’s the time to do it!