By Carla Hindman
PRIDE Finance Columnist
The holidays came early this year! In late July, 2015 parents with children under the age of 18, received a substantial cheque in their mailbox or bank account.
The Government of Canada increased the Universal Child Care Benefit (UCCB) so parents with kids under the age of five will receive a benefit of $160 per month, per child up from $100 a month.
The government also widened the scope of kids eligible to receive the UCCB to include children aged six to 17 years old. While the change came into effect January 1, 2015, retroactive payments were issued in lump sums in July.
According to the government of Canada’s website, the UCCB is a taxable benefit “designed to help Canadian families, as they try to balance work and family life, by supporting their child care choices through direct financial support.”
Moneysense.ca reports that the average cost of raising a child to age 18 is a whopping $243,660, broken down to $12,825 per year ($1,070 per month) and that’s before they go off to university.
With the costs of child rearing at such a high, how can you best spend the extra UCCB incentive wisely?
Offset your childcare expenses. The UCCB was designed to help families offset childcare costs, so an obvious option is to put those extra dollars towards your childcare expenses. In addition, daycare costs can be claimed on income taxes – up to $8000 of the cost for children under age six, and up to $5000 for children ages seven to 16.
Contribute to an RESP. Make an investment to your child’s future by setting up or contributing to a Registered Education Savings Plan (RESP). The government offers 20 per cent matching funds on contributions. A $2500 deposit per child can get you the maximum $500 annual grant. Want to figure out how much your money will grow? Check out an RESP calculator.
Recreational Expenses. Consider using the extra funds for extracurricular sports or arts activities. Don’t forget to explore the Children’s Art and Fitness tax credits available.
Talk to a Financial Planner. Get your financial ducks in a row and evaluate how you can maximize the benefits of the monthly UCCB payout. Reach out to the Financial Advisors Association of Canada (ouradvisor.ca) to help you locate an advisor.
Don’t forget that the UCCB benefit is taxable. By the end of each February, the CRA will issue families a UCCB Statement for tax purposes and parents must report it on their income tax return.
Most importantly, make sure to sign up! According to the Federal Government, more than four million families are eligible for this benefit but approximately 200,000 families haven’t registered yet.
To apply for UCB, Visit the Canada Revenue Agency’s website www.cra-arc.gc.ca/uccb/ , because after all, who doesn’t love free money?
Source: Government of Canada www.cra-arc.gc.ca/uccb/
Carla Hindman is Director of Financial Education at Visa Canada.