Are you maximizing your RESP education grants?

The advantages of an RESP

Most people open a Registered Education Savings Plan (RESP) for similar reasons. The ability to look your child in the eye and promise to help them achieve their dreams. The peace of mind you get from knowing that you are practicing smart financial foresight. The ability to grow income on a tax-deferred basis. And finally, the opportunity to collect government grants to help you reach your education savings goals. Let’s take a closer look at these government grants and explore how you can leverage this RESP advantage.

Maximizing government grants

Having an RESP enables you and your child to receive government-funded education grants paid directly into the beneficiary’s RESP. The government of Canada encourages education and learning for Canadians and provides grants as incentives to save towards their children’s post-secondary education. Additionally, several provinces also offer grants as an extra incentive for saving towards a child’s post-secondary education.

In order to collect the maximum amount of government grants that your child is eligible for in each contribution year, you need to know how much you need to contribute to your RESP. Use this quick reference chart to see how you can optimize your government education incentives.

Canada Education Savings Grant (CESG) $2,500 20% $500 $7,200
Additional Canada Education Savings Grant (ACESG) Average and lower-income families can receive more CESG sooner—30% to 40% on the first $500 contributed each year. Grants on annual contributions between $500 and $2,500 are matched at the rate of 20% as described above. Combined CESG and ACESG lifetime grant maximum of $7,200 per child.
Quebec Education Savings Incentive (QESI) $2,500 10% $250 $3,600
Saskatchewan Advantage Grant for Education Savings (SAGES) $2,500 10% $250 $4,500
The Saskatchewan Government has announced the temporary suspension of this program effective January 1, 2018. The Saskatchewan Government recommends new plan holders to complete a SAGES application and submit it to their plan sponsor for consideration if/when SAGES is reinstated at a future date.
Canada Learning Bond (CLB) No contributions are required. Income eligibility requirements are determined by the government $500 in first qualifying year, and $100 for each following year you qualify until the year the beneficiary turns 15 $500 in first qualifying year, and $100 for each following year you qualify until the year the beneficiary turns 15 $2,000
British Columbia Training and Education Savings Grant (BCTESG)Offered by the government of British Columbia, the BCTESG is a one-time $1,200 grant available to BC resident children born on or after January 1st, 2006. Children are eligible for the BCTESG on their sixth birthday. You have until the day before your child’s ninth birthday to apply.
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CESG carry forward

If you have not contributed to an RESP, or have contributed less than $2,500 to earn the maximum CESG allotment each year, then you can carry CESG contribution room forward to future years. A maximum of $1,000 in CESG can be received in any one given year. For example, if you did not contribute to your child’s RESP in 2012, the $500 CESG not collected is carried forward to the current year. A contribution of $5,000 will attract $500 in grant for the current year and $500 in CESG carry forward grant from the previous year.

Illustration: Your RESP contribution in 2012 was $0, and thus your CESG earned in 2012 was also $0.

Scenario 1: Your 2013 Contributions with no CESG carry forward

RESP Contribution 2013: $2,500
CESG earned: $2,500 x 20% = $500

In this case, you maximized your CESG grant for the year, but did not use any carry forward CESG from the previous year.

Scenario 2: Your 2013 Contributions with CESG carry forward

RESP Contribution 2013: $2,500 + $2,500 = $5,000
CESG earned: $500 for 2013 (current contribution year) + $500 for 2012 (carry forward) = $1,000

In this case, you maximized your CESG grant for the year, and maximized the full carry forward CESG from the previous year.

For more information on how to maximize government grants and make full use of your carry forward grant entitlements, talk to your CST Representative or visit the CanLearn website