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February 13, 2022

Why your kids need an RRSP

By Gordon Powers, Sympatico / MSN Finance

Hard times usually mean that more people are willing to work “under the table." But if you have children under the age of 18 that are making some money make sure they fess up and declare it.

Aside from getting the chance to discuss the pitfalls of the underground economy, you’ll also be helping them to actually save some tax – by investing in an RRSP.

Whether it’s from working in the family business, baby sitting, mowing lawns or refereeing hockey, be sure they report every cent. As long as their income is $10,320 or under, they won't have any tax to pay anyway, thanks to the federal budget’s bump in the basic personal credit.

But filing a tax return will create RRSP contribution room based on the earned income reported. They’ll need to get a social insurance number – they just have to produce a birth certificate to apply – so the CRA can track their income and RRSP room.  

There are some restrictions on investing until they're 18 but they can still build up contribution room for the future. Once they've reached that stage, any money that does find its way into RRSPs can be carried forward further and deducted in a future year when their taxable income is much higher.



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...