What is the Canada Education Savings Grant?
In 1998, the Federal Government introduced the Canada Education Savings Grant (CESG) to help parents save toward their children's post-secondary education. This does not have to be university or college, but includes vocational and technical schools.
The Federal Government of Canada provides anyone who invests in RESPs with an amount equal to 20% of yearly contributions, up to an annual maximum of $500 per child, to a maximum of $7,200.
||For example, if you are able to save $500 a year, the government will contribute 20% of that amount, which would be $100. The grants adds 20% to the first $2,500 annual contribution every year until the child turns 18 (that means an extra $500 per year!) All Canadian children with an RESP can receive the Canada Education Savings Grant. The maximum lifetime contribution limit is now $50,000 per child. There is no longer a limit to how much can be contributed annually.
You may start more than one plan per child; for example if a grandparent, other family member or friend wants to contribute to an RESP, they can do so as long as you don't exceed the $50,000 lifetime total contribution over all the plans per child.
If you don't contribute the maximum amount of money that is eligible for CESG in any one year, your accumulated CESG contribution room can be carried forward. For instance, if you stop making RESP contributions for two years and then start contributing again, you'll be eligible for an additional $1,000 of CESG payments in the year you start your plan up again. In other words, you can carry forward the maximum annual amount for each year you missed.
CESG payments and interest will be paid to the beneficiary when he or she enrolls in an eligible post-secondary program.
When you enroll your child in an RESP plan, most plan providers will apply for the CESG on your behalf.
Some plan providers, such as Heritage Education Funds, can open an plan for your child even before he or she has a Social Insurance Number, meaning you can start saving right away!
Highlights of the CESG
If you opened your RESP Plan in 1998 or later and haven't collected any Grant money yet, you are entitled to a maximum of $500 for each year you missed. These payments are not included in the calculation of your maximum contribution amounts.
If you can't contribute to your RESP for one or more years, you're still entitled to receive CESG* payments for those years. For instance, if you stop making RESP contributions for two years and then start contributing again, you'll be eligible for an additional $1000 of CESG* payments in the year you start up your plan again.
In other words, you can carry forward the maximum annual amount for each year you missed.
*CESG payments and interest will be paid to the beneficiary when he or she enrolls in an eligible post-secondary program.
With an RESP you get a tax break! Your investment grows tax-sheltered, so your children can get the education they deserve.