A Good Budget for Students

The federal budget was just passed by the Parliament of Canada today, and I am rather pleased with it. You can find all the details on their main web page, but I just wanted to point out two aspects that I think are really great for students.

First up is the tax free savings account initiative. Owners of such an account will be able to save up to $5000 a year however they wish (be it stock, cash, or whatever). Then, when the money grows in the account, it will not be taxed. That means no tax on the interest, and no capital gains tax on stocks. When it comes time to withdraw the money, which can be anytime at all, that too will be tax free.

Hmm, sounds an awful lot like an RRSP, you might be thinking. Not quite. When you withdraw from an RRSP, you have to pay tax on the money then. This makes withdrawing from an RRSP before retirement pretty much impossible as your tax bracket tends to be much higher at that point.

So what's so great about this for students? Well, anybody over 18 can open one of these accounts, so your parents, grandparents, or you (if you're old enough) can put money away for school, grow it tax free, and withdraw it when you need it. This is a powerful incentive to save up for post-secondary education (or even grad school if you make it that far) and help avoid debt in the future. Or, if you are a current student with just a little bit extra wiggle-room, it makes it easier to put some money away to help you hit the ground running once you're done.

The second piece of good news will excite the top students intending to pursue a PhD. The Canada Graduate Scholarship will now amount to $50,000 and be available to the top domestic and international students interested in doctoral studies. If I'm not getting the names confused, the NSERC Canada Graduate Scholarship was previously about $35,000 for doctoral students. This is a significant jump and a huge incentive to be the best and continue on in school!

There seems to be a lot about students in this year's budget, but I haven't analyzed any other parts of it, so I can't really comment. I have shared with you what excited me. Why not let me know what caught your attention?