How to Make Your Child Tax Benefit Work for You

5 min. readbyDan VadeboncoeuronJuly 04, 2020
Let's explore what the Child Tax Benefit is, what it's meant to be used for, and how your children's financial health can benefit from it.

My mom used to call it her “baby bonus,” the cheque that would arrive in the mailbox around the third week of the month, giving us a little extra spending cash. She would tell me it was money from the government meant for us, her children. While 10-year-old me would hope for some new Transformers or G.I. Joes to come out of this windfall, my mom would be more likely to use the extra cash to buy us new clothes.

These days, the cheque has become a direct deposit, and the amount is seemingly more than it was in the ‘80s, but the Canada Child Tax Benefit continues to help families across the country make ends meet. But here’s your opportunity. Invest your monthly “baby bonus” towards their future if you can. Working with a Financial Planner is so helpful when it comes to figuring out how to make this money work for you and your child’s future. Here are a couple of tips to get you started.

RESPs (Registered Education Savings Plan)

The cost of post-secondary education will be one of the largest expenses of your child’s life. Think about how long it took you to pay off your student loans. Wouldn’t you like to spare your child from that debt and stress? Even a moderate investment of $200/month (less than half of your Child Tax Benefit) into an RESP could pay for most if not all of their tuition costs.

In-trust investment account

The only downside of a RESP is that it must be spent on education. And let’s be honest, there are a lot of other expenses that life throws at you when you’re just starting out as an adult. Building an investment portfolio on behalf of your child using an in-trust account is a good way to build wealth for them to cover the other parts of life: a vehicle, rent, furniture, even a down payment on a starter home. All these are possible if you take the other half of that monthly benefit and literally invest it in your child’s future. You’ll want to consult a financial advisor for help, but overall these investments should be focused more on capital gains rather than dividends.

Life insurance

This one’s a bit indirect, and it’s certainly a morbid topic no one really wants to discuss, but bear with me here. I know that if something were to ever happen to me, I would want my children to be financially secure after I die. Funerals cost thousands of dollars, and the death of a parent often does cause new debt for the children. A good life insurance plan prevents that from happening and will give your children added financial security no matter what stage of life they are at. Now, you may already have a life insurance policy through your employer, but if you’re like me (back when I was first hired) you chose the cheapest option, with no flexibility and low payout. Invest part of your child care benefit into a good, flexible insurance plan with your children as the beneficiaries, and you will be helping them at a time when they need it most. It’s tough to think about not being around for them. Think about it long enough to insure they have a happy future after you’re gone.

There are many other ways to invest that “free” money that comes from the government every month. As I said, consult a financial advisor for more options. The point is, do something with it. Don’t spend it on G.I. Joes and Transformers (or their modern-day equivalents). Invest for your children’s future. Because even when they become adults, you will still be their parent.

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