Maximize Your RESP Savings with Government Grants

The Canada Education Savings Grant (CESG) is a government program designed to help Canadian families alleviate some financial hardship with savings and funding their children’s post-secondary education. The program provides additional funds up to the lifetime limit of $7,200 per beneficiary for the CESG.

To be eligible for the CESG, the contributor and the beneficiary must meet certain criteria:

• The contributor and beneficiary must be a Canadian resident with a valid Social Insurance Number (SIN).
• The beneficiary must be under the age of 18 at the time of the RESP contribution.
• The contributor must open an RESP account for the beneficiary with an eligible RESP provider.

Once eligible, contributors can make RESP contributions for the qualified beneficiary. These contributions can be made regularly or as lump sums, up to the lifetime contribution limit of the CESG. The CESG provides a 20% matching grant on the first $2,500 of annual RESP contributions per child, up to the maximum of $500 annually per child.

As part of the government grants offered for RESPs, the CESG offers several benefits for families saving for their children’s education:

• The CESG matches part of the contributions made to the RESP, effectively boosting the savings in the RESP.
• Contributions to the RESP, including CESG funds, grow tax-deferred until withdrawn, allowing savings to grow faster.
• CESG funds, along with investment growth, can be used to cover a range of educational expenses.
• The CESG helps reduce the financial burden of post-secondary education, making it more accessible for their children.

Exploring Additional Grant Opportunities in an RESP

In addition to the Canada Education Savings Grant, there are other grant opportunities for education savings, such as the Additional CESG and the Canada Learning Bond (CLB). Let’s explore the purpose and eligibility criteria for these grants.

Additional Canada Education Savings Grant (CESG)

The Additional CESG provides additional support to low and middle-income families by potentially increasing the CESG amount. The income thresholds for the Additional CESG are based on the adjusted family net income reported on the previous year’s income tax return.

Instead of the standard 20% matching rate for the Basic CESG, the Additional CESG offers a higher matching rate on the first $500 of annual RESP contributions for eligible beneficiaries. The additional contributions can total up to $100 or $200 per year, depending on the family’s income level.

Eligibility for the Additional CESG is based on the family’s income and the number of children in the household. Families with lower incomes are more likely to qualify for the Additional CESG, providing them with additional financial support for education savings. You must apply for the Additional CESG through your RESP provider and provide documentation of your income.

Canada Learning Bond (CLB)

The Canada Learning Bond is another grant program aimed at helping low-income families save for their children’s post-secondary education. Since July 2017, eligibility for the CLB is determined by the number of qualified children and the adjusted income of the primary caregiver (PCG). The PCG must file income tax returns and be eligible to receive the Canada Child Benefit (CCB)

Upon enrollment, the Government of Canada provides an initial CLB amount of $500 to the RESP for the eligible beneficiary, with an additional $100 provided annually until the age of 15, for a maximum total bond of $2,000. Unlike the CESG, no contributions are required from the subscriber, typically a parent or guardian of the beneficiary, to receive the CLB. The government contribution goes directly into the RESP.

Understanding the Grant Process

Receiving the Canada Education Savings Grant is typically an easy process. Once you’ve opened an RESP and made contributions for the beneficiary’s education, the CESG is often deposited directly into the RESP account by the government. This seamless process minimizes extra steps for you, ensuring your education savings grow efficiently. A portion of your contributions are matched by the CESG program, helping to maximize your child’s education fund.

Applying for the Canada Learning Bond is also a straightforward process. If your child is eligible for the Canada Child Benefit (CCB), they are eligible for the CLB by the Government of Canada. An application is required to apply for the CLB. This can be applied for through your RESP provider.

Maintaining accurate records of your RESP contributions is crucial for several reasons, especially when it comes to calculating grant amounts like the CESG and CLB. Keeping track of your contributions ensures you receive the full entitlement of government grants for your child’s education. Accurate record-keeping also helps you stay organized and informed about the growth of your education savings over time. You can confidently plan for your child’s future educational expenses and maximize the benefits of grant programs.

Important Considerations for Long-Term Planning

While the CESG offers valuable support for education savings, it’s essential to understand the circumstances that might trigger grant repayment. If RESP funds are not used for eligible educational purposes, such as post-secondary education expenses, You may need to repay the CESG funds to the government.

For example, if the beneficiary decides not to pursue post-secondary education or if you withdraw the RESP funds for non-educational purposes, such as personal expenses, the grants collected on the withdrawn principal amount may need to be returned to the government. Once grants are returned to the government, they cannot be collected again, and there are other grant implications. It’s crucial to consider these scenarios and plan accordingly to avoid grant repayment and maximize the benefits of the RESP funds and grant programs.

Using RESP funds for non-educational purposes can also have potential tax implications. Contributions to the RESP and the grants received grow tax-deferred. If certain conditions are met, and the income in the RESP is withdrawn for non-educational purposes, the income is subject to taxation at the subscriber’s tax rate and is also subject to a 20% penalty tax.

Building a Comprehensive Strategy

Building a comprehensive education savings strategy involves considering various elements beyond RESP grants, such as scholarships, bursaries, and other savings vehicles. Here’s how RESP grants can fit into a broader education savings plan:

• RESP Grants as a Foundation: RESP grants, including the CESG and CLB, serve as a valuable foundation for education savings. They provide a boost to your savings efforts and help maximize the growth of your child’s education fund.
• Scholarships and Bursaries: Scholarships and bursaries are additional sources of funding for post-secondary education. These awards are typically based on academic achievement, extracurricular activities, community involvement, or financial need. Incorporating scholarship and bursary applications into your education savings plan can help supplement RESP funds and reduce the financial burden of tuition and other expenses.
• Diversification and Flexibility: By diversifying your education savings across multiple sources, you can spread risk and take advantage of different benefits and features. For example, RESP grants offer matching a portion of your contributions from the government, while scholarships and bursaries provide direct financial assistance based on merit or need. A combination of resources gives you flexibility in funding your child’s education and ensures you’re prepared for various scenarios.
• Regular Review and Adjustments: It’s essential to regularly review and adjust your education savings plan based on changing circumstances, such as fluctuations in income, changes in education goals, or updates to government grant programs. By staying proactive, you can optimize your savings strategy and make the most of available resources.

Frequently Asked Questions

Can anyone apply for RESP grants?

Not everyone can apply for RESP grants directly. The grants available through RESPs are typically applied for and received by the RESP provider on behalf of the beneficiary and the subscriber. However, there are eligibility criteria that must be met to qualify for the grants.

To be eligible for the CESG, the subscriber and the beneficiary must be Canadian residents, the beneficiary must have a valid Social Insurance Number (SIN), and the RESP account must be opened with an eligible provider. Additionally, there are contribution limits and income thresholds that may affect eligibility for the Additional CESG program.

The Canada Learning Bond is targeted at low-income families. Eligibility is based on the beneficiary’s family income and the CCB. Children born after December 31, 2003, and who are eligible for the CCB can apply. An application form must be submitted through their RESP provider to apply for the CLB.

Is there an age limit for opening an RESP to qualify for grants?

Yes, there is an age limit for opening an RESP to qualify for grants. For CESG eligibility, the RESP must be opened before the end of the year the beneficiary turns 15. In order for 16- and 17-year-olds to received CESG and ACESG, certain conditions need to be met.

Children born in 2004 or afterwards are eligible for the CLB. If the CLB has not been applied for previously, once a child reaches the age of 18, they can apply for the CLB on their own through a RESP promoter. They must make the application before their 21st birthday.

Can I carry forward the unused CESG room?

Yes, you can carry forward unused grant room. If all the basic CESG in any given year has not been collected, it is carried forward and is available to collect in future years. The government will allow contributions up to $5,000 a year to collect grant, which includes the grants of up to $500 for the current year, plus up to $500 of grant from the past years (provided there is accumulated grant room to be carried forward).

If your child is a resident of Quebec, you could earn up to $3,600/child as part of the Quebec Education Savings Incentive (QESI). This grant is provided as a refundable tax credit from Revenu Québec that is deposited directly into your RESP.

If eligible, you will receive a grant equalling 10% of your annual RESP contributions – up to $250 in grants per year, with a lifetime maximum of $3,600 per child.

Additional QESI

Depending on your income, you can also earn an extra 5% to 10% off the first $500 you contribute each year. This means eligible low- and middle-income families could also receive an additional $50 per year, calculated using net family income. This is in addition to the standard QESI government contributions. We can help you learn more about this.