David Morey 
An RESP, or registered education savings plan, is an investment made specifically for parents who want to save money for their child’s education. The funds put into this account can increase without taxes until the child begins college or university.
The RESP’s appeal lies not only in its features of tax-deferred growth and ability to make withdrawals free from tax but also in the additional benefit of government grants, which increase contributions made by parents, guardians, or other family members.
Even though most Canadians know about RESPs, less than half actually use them. Here are a few types of government grants you should be aware of when considering an RESP.
Canada Education Savings Grant (CESG)
One of the key components of the RESP is the Canada Education Savings Grant. This RESP government grant will give you 20% on the first $2,500 put into your RESP per year for each beneficiary. It can reach up to $500 every year and a total of $7,200 within the duration of this plan.
The CESG is made to help savings for education be within reach of every family in Canada. Also, families with less income benefit more as they get extra CESG rates. Depending on the net income of a family, the government will add 10% or 20% to the first $500 deposited each year, which makes sure that all children from different backgrounds have better opportunities to get higher education.
Canada Learning Bond (CLB)
The Canada Learning Bond provides extra help for families that require it, which is aimed towards children from families receiving the national child benefit supplement.
Children who are eligible will get an initial bond of $500, put directly into their RESPs. They then receive yearly payments of $100 up until the age of 15, if they stay eligible. The total amount could reach $2,000. All this money is meant to begin the savings even if the family cannot add its own funds in RESP.
Provincial Education Savings Programs
Aside from the federal grants, there are some provinces that have additional programs to boost educational savings. The British Columbia Training and Education Savings Grant is one such example, where a single-time grant of $1,200 is given to kids aged between 6 and 9 years old with no extra contributions needed from family members. These local benefits show how important early savings for education are at various levels of government.
Additional CESG: How to Qualify
To get the most benefits from CESG, it is important to understand who can receive extra grant amounts. Families that have an adjusted net income of $49,020 or less are eligible for 20% more on the first $500 contributed. Those with earnings between $49,020 and $98,040 can get an extra 10%.
There is no need for an extra application because, as standard practice, the RESP providers automatically apply for these grants. They do this according to the income details received from the Canadian Revenue Agency. This method guarantees that extra support goes to those who require it most without any additional bureaucratic load on families.
Maximizing RESP Contributions
Strategic planning could make a big difference in the benefits you get from an RESP. If you put at least $2,500 each year into your kid’s RESP, you can maximize the CESG contributions to receive the full $500 per year.
In addition, starting an RESP as soon as possible is a good idea because the total CESG limit for each child’s lifetime is $7,200. Any contributions made after reaching this limit will not receive any matching from the government. Therefore, planning ahead can help you fully utilize all the available grants.
What Happens If You Don’t Use the RESP?
The child who is designated as the beneficiary on the RESP may decide not to continue with post-secondary education. If this happens, it does not mean that all money put into the plan will be lost. You can withdraw your contributions from an RESP without any penalties incurred; however, you must return any grants received back to government authorities.
Or, if you have another child, the RESP can be shifted to them. There are also plans where you can move the money into a registered retirement savings plan (RRSP) under specific situations that keep its growth intact.
Final Thoughts
Utilizing the RESP’s government grants is a big assistance in a child’s education. These grants assist families in better managing the costs of post-secondary education and provide more opportunities for their children.
Given the complexity and variety of options, it is advisable to talk to a finance consultant who can help in tailoring an education savings plan based on your specific financial circumstances and goals. This active method ensures that when needed, money for education does not become a hurdle for your child’s aspirations.
