Many dividend blogs on the internet have a similar goal when it comes to dividend reinvesting – quitting the rat race and retiring early. Here’s the thing, early retirement is not motivating enough for me to invest. Why? I’m not even in the rat race! In fact I cannot wait to rejoin the labour market. However, the cost of working currently keeps me from returning to work… if that makes sense?
What motivates me is replacing the Child Benefit subsidy. It is a bit ridiculous the amount the government sends me each month. It is equivalent to working 40 hours a week at $10/hour without taxes. Granted, I have four kids and we are considered “lower income”. To my supposition, the amount the government came up with is based on people having fewer kids (i.e. lower benefit amount), childcare costs and super high living expenses in urban areas where most Canadians live. However, there is a hitch to receiving this money. If I were to join the labour market and pay for daycare in Québec, I would have to earn substantially more income than $10/hour to come out with the same amount in disposable income. “But Québec has $7-a-day daycare Heather?” you ask.
Well… that’s not really the case. The government run daycares or CPEs are on a sliding scale according to income. In rural Québec, there are very few CPEs and even fewer spaces. If I were to send my kids to a private daycare I could apply for a monthly tax return. Once you start working, your family income increases and you would then receive less in the monthly tax return. Last year, I did send two of my kids to daycare while I was pregnant and it cost me around $82 per day. Cheaper than Ontario but it would completely wipe out the child benefit I receive. As well, this does not include before or after school care for my other children which I would require should I go back to work.
The marginal savings of a couple hundred dollars per month are not worth the hassle. So this begs the question, why not just mooch off the government? Well, taxes of course and freedom of choice. First and foremost if income taxes and sales taxes were lower in Québec there would be less need for high child subsidies. People would just have more disposable income in general. Second, freedom of choice. Which may seem weird to some but hear me out. I should be free to have children without government interference. Should I decide to have 10 kids, I do not want that decision to be based off some government financial incentive program.
Therefore, replacing my Child Benefit with my dividends is the goal. If I am able to replace the Child Benefit with my dividends, in particular those from my TFSA, my dividends would render the Child Benefit inconsequential to me. Does this make sense?
Benefits can decrease, disappear and are generally unpredictable with each passing government. Besides, this is not ‘earned’ income but taxpayer money and should be treated with more respect than disposable income.