In a country with high living costs, raising a child is not an easy task. Luckily, the Canadian government provides different child benefits that support raising our next generation and in this post, I’ll be covering an overview of them that you may be eligible for throughout your child’s life.
First, let’s cover employment insurance to prepare for maternity or parental leave. If you are working and paying into your employment insurance (EI) premiums, then you are entitled to 55% of your income each week when you go on leave once your baby arrives. The max of this EI is $573 per week and there are two parts to this benefit: maternity leave and parental leave.
Maternity leave is only eligible to the mother and has to be within 13 weeks of the expected due date of your baby. You will receive 55% of your original income, or max of $573 per week for the next 15 weeks. The benefit will then be followed by a parental leave benefit which can be taken by either parent. You can apply for both at the same time with the option of a standard for up to 40 weeks, or an extended leave up to 69 weeks. With the standard, one parent can only take up to 35 weeks and up to 61 weeks for the extended. The other parent will be eligible to take the remaining time. The extended benefit comes at a reduced rate of 33% with the max weekly amount of $344. You can use this calculator to estimate what your benefits would be here.
For example, Joe and May are new parents and May applied for both the maternity and parental benefits. She would first receive the 15 weeks of her maternity benefit, followed by 35 weeks of parental benefit. The remaining 5 weeks of standard parental benefits would have to be taken by Joe if they would like to maximize the standard benefit. May could also decide to take 30 weeks of parental leave and let Joe take 10 weeks of parental leave, as long as it adds up to 40 weeks.
Your family situation may determine which option you would like to choose. As an example, while the extended benefit is less per week, if you factor in the cost of childcare, it might make sense for some families to go this route.
The next benefit is the Canada Child Benefit, or the CCB, is for after your newborn arrives. It provides every child under 6 years old up to $6765 per year. Children between ages 6 and 17 can receive up to $5708 per year. This is equivalent to roughly $500 a month per child throughout 18 years. This benefit can be applied for once the child is born using the child’s birth certificate. The requirement to be eligible is that either parent must be a tax paying resident of Canada. This benefit is also income dependent so every family will receive a different amount based on their income and eligible for households up to $200,000 annual income.
To find out exactly how much you will receive from the CCB, you can use this online calculator from Canada.ca. The Child Care Benefit is also tax-free so families do not have to pay taxes on the benefit received.
As your child grows, there are education benefits to start thinking about as they reach an older age and prepare for post-secondary. Education is probably one of the most important things for a child so as you may expect, there are many benefits that help children with their education in Canada. In Canada, children receive free education from the age of 6, all the way up to when they are 18. Most daycares for children under the age of 6 are not free, unless you have family support, so subsidies are provided to help with childcare. This benefit is provided by the provincial governments so it will be different for each province. In British Columbia, there is the Affordable Childcare Benefit where families get a maximum of $1250 per month. Normally, the younger the child, the higher the subsidy the parents would receive. However, in BC, families with a combined income of over $111,000 do not qualify for this benefit.
Costs of childcare are tax deductible but must be claimed by the parent with the lower income in the household. If the one parent does not work, it is assumed that they are the caretaker and the family would not qualify to deduct these expenses.
Now let’s talk about post-secondary or education for children over 18. To prepare for post-secondary for your child, there is the Registered Education Savings Plan, or RESP, where every dollar you save into the account is matched by the government by 20%. For example, if you contribute $2500 per year, the government will grant you $500. A smart tip is using the paycheque from the Child Care Benefit to contribute to your RESP so you essentially are using free money to attract more money! You can learn more about RESP in my RESP 101 blog post here.
There is one more child benefit available but this one is applicable only to BC residents only. Families with children may qualify for the Property Tax Deferment Program, which is a low interest loan program that allows you to defer your property taxes on your principal residence. It allows you to defer paying your property tax until you sell your property or when your child has grown up. With the interest rate sitting at prime 2.45% currently, it might be an advantage to leverage this low interest rate and invest if the return is higher than this interest rate.
There are many benefits you can receive from both the provincial and the federal government to help with raising a child in Canada. If you would like to get a complimentary assessment of your finances to prepare for your growing family, please feel free to reach out for a personalized recommendation. Or if you would like to learn more about building your wealth in Canada, subscribe to my YouTube channel where I cover topics on retirement, wealth and insurance to help Canadians make better financial choices.