It really is a shame that so many benefits, credits, and grants have deadlines of Dec. 31. The reason? This comes right after the holiday season, when Canadians across the country are spending, spending, spending. They simply don’t have the resources to put cash aside for investing at this point, and that’s literally costing them money.
That’s why today, before you spend everything on others, make sure to take care of your future self. To do this, don’t forget about these Canada Revenue Agency (CRA) benefits that have deadlines of Dec. 31. They could bring in a whole lot of cash for the new year.
Canada Education Savings Grant
If you have children, then the Canada Education Savings Grant (CESG) is perhaps one of the best things you can do for your child. In fact, it benefits you as well. Rather than worry about spending tens of thousands for your child all at once, you’ll have saved enough to put them through school by contributing each and every year to the Registered Education Savings Plan (RESP).
But there’s a huge benefit to contributing annually. No matter what your family income is, the CESG contributes 20% of annual personal contributions to all eligible RESPS to a maximum of $500. However, the maximum can increase to $1,000 if unused from the year. This comes to a lifetime limit of $7,200.
That means if you’re contributing $2,500, then that $500 will be added on in the new year, but only if you don’t miss the deadline! And if your family is of lower income, that can increase to $600 per year.
First Home Savings Account
Another new account that Canadians can enjoy is the First Home Savings Account (FHSA). The FHSA allows you to start saving for a new home, but there are some limits. After starting up April 1 of this year, every year Canadians have the ability to add cash to their FHSA before a Dec. 31st deadline.
The maximum period for having a FHSA, however, is Dec. 31 of either the year you turn 71, the 15th anniversary of opening the FHSA, or the year after making your first qualifying withdrawal. The FHSA also has maximum participation room for each year. This can be contributed or transferred from your Registered Retirement Savings Plan (RRSP).
The maximum cannot exceed $8,000 in the first year, with a lifetime limit of $40,000. So, no matter what, this year, you cannot go beyond the $8,000 maximum. However, you’ll still want to try and hit that before the Dec. 31st deadline.
Make more!
The purpose of these contributions is to save and create interest. There are two ways to do this. For the RESP, I would recommend investing in some Guaranteed Investment Certificates (GIC). These are perfect right now, because you can get locked in, fixed income for your child’s future. And if they’re young, you won’t need it for quite some time!
The FHSA, however, is quite different. You could need that in the next year. So, you’ll want to be a bit more aggressive. I would therefore recommend investing in high-yield dividend payers, whether it’s stocks or exchange-traded funds (ETF). A great option right now is some of the banks, though Royal Bank of Canada (TSX:RY) looks the best.
RBC stock offers a higher dividend after increasing it during the fourth quarter. It still trades below 52-week highs but jumped after strong earnings. Therefore, you could see returns faster than the other banks and continue to collect and reinvest dividends.
So, don’t let your cash just sit there. Make sure to invest what you can before the Dec. 31st date and put it to good use. That way, you can reach all your goals with plenty of cash when needed.
