Parent Time

One way to get your kids to save money is to top up their piggy bank: They put in a dollar and you add 50 cents. Think of an RRSP as a similar bargain for you: Drop in a deposit and reap a juicy tax break, courtesy of the government. The deadline to contribute this year is March 1. Here’s a rundown of the basics:

How do RRSPs work? A Registered Retirement Savings Plan is an account that helps you save for your life after work. The money you contribute is deducted from your taxable income, so the more you put in now, the bigger your tax refund in the spring. You can generally contribute 18 percent of your income, up to $21,000 annually.

Should everyone contribute? If you and your spouse earn about the same, you should both have RRSPs. However, if one of you earns substantially more, you’ll maximize the benefits if the spouse with the higher income contributes, says Tina Tehranchian, a certified financial planner in Richmond Hill, Ont. Simply put, the more you earn, the more tax you pay, and the more you could save by contributing.

That said, every family goes through lean years and if you feel there isn’t enough left over after covering daycare, the car payments and a surprise house repair, skip this year. You’ll be able to make up for it down the road, when your fixed expenses aren’t so high.

Originally published in Today's Parent, Feburary 2010