Following the previous article, Katie and Julie continue their discussions about managing their family finances as new mothers. Their biggest difference is Julie is not eligible to receive EI benefits, since she has her own business. However, there are other financial benefits for families to consider, such as tax benefits, RESP’s for children, as well as long-term financial investments like RRSP’s for retirement. Here’s a breakdown of a few financial benefits they discussed.
Financial benefits like EI help, but it doesn’t cover everything
Julie: I envy those who can get EI benefits for maternity leave. I own a business myself and I get no benefits.
Katie: It’s hard to generalize, but those who get benefits tend to be less prepared financially for maternity leave than those who don’t receive financial benefits. It’s important to keep in mind, however, unless your employer tops up your salary, EI income usually means a reduction in your income. For instance, if you get paid $1000 biweekly, your expected EI should be around $400-500 biweekly, nearly half of what you earned working.
– Top up benefits is when you get paid a part of your salary on top of EI benefits. The amount is different for each company
– Employment Insurance (EI) is a temporary financial benefits program to help assist the unemployed with their finances
– EI is usually a fixed percentage (around 55%) that is given to you based off a maximum premium amount that is contributed
– To learn more about eligibility and conditions visit the Government of Canada’s website
Government Financial Benefits
Julie: Did you find government benefits helped you a lot?
Katie: I don’t get a maternity leave top-up, but the EI benefit I receive definitely helps. In addition to EI, we get universal child care benefits for each child. The former conservative government increased the benefits, but they made it taxable, which sort of negated the increase. The new liberal government is initiating some changes to the benefit structure, so hopefully they will be better.
Currently, most Canadians citizens with children are eligible for child care tax benefits and universal child care benefits. There are also other financial benefits like the national child benefit supplement, child disability benefits and other related programs, but we aren’t eligible for them.
Another thing that I benefit from is tax deductions for child-related expenses, since both of us are working parents. Basically, the daycare cost is tax-deductible, which is quite beneficial in the end.
– Universal child care benefits (UCCB) and Child care tax benefits (CCTB) are now replace by Canada Child Benefit as of July 2016. It is still calculated based on your income and you get assistance financially to raise each child under the age of 18
– For each child that is under 7 years old there is a $7,000 tax deduction limit for child care expenses
Registered Education Savings Plan (RESP)
Julie: What about RESP? Is it something that you’re contributing towards?
Katie: Every year we hope to contribute to our kids’ education fund, but we don’t always succeed in putting as much money aside as we’d like. It’s a great idea to contribute to an RESP, since the government matches the contribution with a particular interest rate, and the beneficiary can take out the money even if their child does not choose to pursue higher education.
Also, the beneficiary will only have access to the money when it is transferred to make payments for their school. If my kids don’t follow through post secondary education we can close the account and take our money out without receiving the interest.
– If your net income is $45,282, for a basic Canadian education savings plan you can contribute a maximum of 2,500
– There are two different kinds of plans, family and group plans, that you can contribute to but they have different restrictions
Retirement Planning
Julie: At this point, what are your long-term financial goals?
Katie: This is becoming a more urgent question as I approach the mid-point in my career! My husband and I have been thinking about investing into another property, since our investment for our current home has had great results in the last 10 years. We are open to other investment options, but we don’t feel equipped to start learning anything as complex as stock investing at the moment.
– Registered Retirement Saving Plans (RRSP) and Tax-free savings account are great place to start investment. Within those accounts, you can design tax-sheltered investment portfolios.
– If your RRSP’s aren’t locked you can take out the money anytime making your investment more accessible