This week we are focusing on two of the lesser known benefits of RRSPs and RESPs for parents. Most people know that contributing to your RRSP reduces your taxable income for the year, and most people know that RESP contributions earn a grant from the government of up to $500/year. In this post we are going to look at some of the other benefits of these programs as they apply to parents of children under the ae of 18.

1) RRSPs to boost the Canadian Child Benefit. The Canada Child Benefit is paid out based on the number of children in your care, the age of those children, your marital status, and your adjusted family net income. See this page for all of the specifics: How much can you get - Canada child benefit (CCB) - Canada.ca. Because an RRSP contribution reduces your Adjusted Family Net Income, it increases the amount of CCB you qualify for as well. Further increasing the benefit to parents.

2) RESPs are like TFSAs? Registered Education Savings Plans are fantastic investment opportunities for a couple of reasons, and in some specific cases are better than a TFSA. You get a government grant of 20% on the first $2,500 that you contribute per child per year. From a return on investment perspective this is an automatic 20% bump on the contribution (better than a TFSA). After that, the funds grow in a tax-deferred way (just like a TFSA). On withdrawal, the income and grant portion is usually allocated to children who usually have little to no income, and so sometimes they will not pay any taxes on the RESP withdrawal (which is just like a TFSA).

Could you put it all together into one coherent strategy? Yes!

Contribute to your RRSP. Reduce your taxes owing, sometimes generating a tax refund. Take that tax refund, and your (now increased) Canada Child Benefit and contribute to your RESP, earning a 20% government grant. 

Our team's motto is: "Our family, helping yours". If you're considering opening an RESP, or contributing to an RRSP, we would love to discuss our you can do that with our team at CIBC Wood Gundy.