Why using the UCCB for an RESP is a smart play for parents

Family in grass

By: Marjorie Cullen

Parents across Canada will be enjoying a bit more wiggle room in their budgets this month thanks to an increase in the Universal Child Care Benefit (UCCB). 

The UCCB program is not only being extended to include children ages 6 through 17 but will also see an increase of $60/month per child for those who were already enjoying the  benefit.

I’ve been seeing a lot more coming out about the UCCB especially recently, including this video post from the Globe and Mail.

UCCB - Globe and Mail

Personal Finance Columnist Rob Carrick and blogger and mom, Kerry Taylor from squawkfox.com talk about how the increase provides “free money” to help parents save for their children’s education in an RESP.  

I think the overall message of this video is good news for parents who want to be prepared for their child’s future education but there are some important details about how the program actually works that a parent will need to be armed with before deciding what to do with the UCCB.

It used to be that the UCCB stopped when the child turned 6.  Now, children under 6 receive $160 a month plus children 6 and older receive $60 a month (ending when the child turns 18). Putting that extra $60 a month into a Registered Education Savings Plan (RESP) could provide up to $12,960 for a child born on or after January 1, 2015 through age 17 towards college, university or other schools.

But, the UCCB is a taxable benefit and therefore not free money unless your income is extremely low.  Which is why the term “free money” doesn’t work.  We’re seeing lots of articles coming out in the press these days on this.  But parents take heart, there’s one option that’s available that can help you recoup some of the UCCB after tax time.

The federal government also provides a matching grant (the Canada Education Savings Grant or CESG) on your RESP contributions.  The CESG matches 20% of your first $2,500 in contributions per child each year until the child turns 18, to a maximum of $7,200.   If your annual contributions in previous years have been less than $2,500, your unused grant room is carried forward.  So you can use the increased UCCB to help save for your child’s education and be rewarded for doing so by attracting more grant money sooner into your child’s RESP.   

Marjorie Cullen, B.Sc., MBA

In addition to blogging for CST, I am a futurist and writer for CST Inspired Minds Careers 2030 and have authored three children’s books inspired by my own role as a parent through international adoption.