An Increase To UCCB Money In 2015 Could Jumpstart Your RESP
If you’re one of those families who wants to start an RESP but can’t seem to find the cash for education savings, added help may soon be here in the form of an increase to the Universal Child Care Benefit (UCCB). Read on for the details on how the proposed increase works, and how it can help jumpstart (or maximize) your family’s education savings in an RESP.
What’s the UCCB?
The UCCB is a taxable cash benefit currently available to eligible Canadian families with children under the age of six, whether the child received care at home, in daycare, or in another setting. Currently the maximum monthly benefit is $100 per child and there are no restrictions on how a family spends these funds.
How the UCCB could be changing in 2015
Under proposed legislation, according to the Canada Revenue Agency (CRA), the UCCB would increase to $160 per child, retroactive to January 1, 2015. This equals an additional $720 per eligible child under the age of six, increasing the annual UCCB amount from $1,200 per child to $1,920.
Even better, the proposed changes would extend to families with kids right up to age 18, though the monthly amount is $60 for each eligible child aged seven or older. This potential $720 annual windfall would be a great way to get that RESP started.
More UCCB, more to invest in Your RESP
In a world of $150 running shoes, an extra $60 a month may not seem like much. Yet for families with little ones that start investing early, save monthly, and stay invested, even a small amount can grow significantly within an RESP. Government grants play a significant role in this. For example, should you meet the conditions, you could qualify for the Canada Education Savings Grant (CESG), which contributes 20 percent on top of what you invest in the plan (to a lifetime maximum of $7,200 per child). You may also qualify for the Canada Learning Bond (CLB), which could contribute another $2,000 to your child’s RESP.
There’s also the magic of compound interest to consider. For example, let’s say a family with a household income between $43,561 and $87,123 has a four-year-old, and the UCCB of $100 they’ve been receiving monthly has been helping pay for childcare. They decide to contribute the additional $60 a month resulting from the proposed UCCB change to a family RESP. With the 20 percent CESG, CLB, plus 6 percent investment earnings on the CESG and the family’s contributions, that $60 per month will grow to $20,278.53 (less sales charges) by the time the child is eighteen.
How the UCCB can help grow your RESP
Here’s one more piece of good news: because the proposed changes are retroactive to January 1, 2015, eligible families would be entitled to a lump-sum UCCB amount in July 2015, receiving seven months worth of the adjusted amount. At $60 per child, that’s $420 to either make as a contribution to an existing RESP or it’s a perfect incentive to open a new RESP for children who don’t yet have one.
Post-secondary education is expensive. And while most Canadian families know this, trying to come up with extra money each month to start (or increase) contributions to an RESP is a real struggle for many. By committing to saving the extra money your family would get as part of the proposed UCCB increase, you’ll be on your way to helping your children afford the education they deserve.
Not sure how much money you’ll need for your child’s post-secondary education? Use our easy RESP calculator to help you figure it out.
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