Making something out of nothing

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Money is available for your child’s future.  Make it work!


Sometimes we need a fresh way to look at something available to us and consider how we can use it to our best advantage.  Small savings can build to something big.  If only we would make the plan to save, and stick to the plan and let it grow.  Just imagine.


In light of the Enhanced Universal Child Care Benefit (UCCB) for children announced in late 2014, it would be fitting to illustrate how to combine some of the benefits from the UCCB available and multiply it even further by using those funds in an RESP to save for post secondary education and qualify for RESP grant money as well. 

If you have kids under the age of six, there is money available to you.  Are you making the most of it?


The Universal Child Care Benefit (UCCB) will provide families with $160 per month for each child under 6 (currently $100).  Although the new benefits will go into effect on January 1, 2015, in practice, you won’t receive your first cheque until July 2015 but it will be retroactive to January for the full amount.


There is also grant money available through the Registered Education Savings Program.  On average, for every $100 a family saves inside an RESP, an additional $20 will be provided in grant money.  While there may be additional grants available to some families, we will assume the 20% grant amount in our example.


If you are someone who is able to consider these government benefits as something extra, something you will not need to use for day to day living this might be an idea for you.   If you are someone who can stick to a monthly plan equivalent to the value received through the benefit programs, you can create something of great value for your child’s future.


Now let’s put these two programs together.  Let’s say you saved all of this UCCB money for your child in an RESP from birth to age 6 and then let it grow.  You would be saving $160 per month in UCCB benefits until age 6, which amounts to $192/month if saved in the RESP after the 20% grant is added. 


What would you have at the child’s age 18?  In a portfolio with an average investment return of 4%, you would have $25,182 at age 18.   At 5% it becomes $29,268, and at 6% it becomes $34,023.


To amp this scenario up a notch, there is also a new element of the UCCB which could provide up to a $60/month tax credit to families for each child from ages 6 to 17.   These amounts could also be added into the plan after age 6 to increase the RESP investment even further.


Now that’s making something out of nothing.  This is just saving what is given to you in a smart way.  With a simple idea to save your government benefit dollars, it can really add up to something big.


Speak to your financial advisor about your personal situation and how to make a plan to make the most of these government benefits for post secondary education.


Link to column as it appeared in Elgin This Month June 2015 edition (page 7)


Stephanie Farrow, B.A., CFP., Stephanie has over 20 years experience in financial services industry, diploma in Financial Planning from the Canadian Institute of Financial Planning , and Cerfied Financial Planner designation.  Stephanie has been writing a financial planning column for the local business magazine Elgin This Month since 2010.  Stephanie and her husband Ken Farrow own Farrow Financial Services Inc.  About our Farrow Financial team.