The cost of post-secondary education has become increasingly expensive in recent years. This means that it’s more important than ever for teens and their families to start saving money for college as early as possible.
The Canada Education Savings Grant began in 1998 and is a great way for parents and guardians to start setting money aside for their children to use for their future education.
Applying for the CESG grant is relatively simple and straightforward, so all eligible Canadian parents should look into it. Below, I’ll explain a bit more about what the CESG grant is, how to apply, and how much your child could receive for their education.
What Is The CESG Grant?
The Canada Education Savings Grant (CESG) is one of the best ways for parents to start saving for their kids’ futures. It’s not just a one-time grant either, it’s a grant that is paid every year to eligible recipients. So, the earlier you start, the more you (and your child) stand to gain.
Here’s how it works:
- Parents and guardians apply for the CESG through a registered education savings plan (RESP) promoter
- If approved, the Canadian government will match 20% of your RESP contributions (up to $500) every year through the child’s 17th birthday
$500 per year put towards your child’s education can easily add up by the time your child is ready to attend university. The money can be used towards books, tuition, college living expenses, school supplies (including computers), and other education-related necessities.
A Registered Education Savings Plan (RESP) is a tax-free account that parents and guardians can open for their children. The money contributed to an RESP account is tax-free and allows parents to start saving for their children’s future education.
In addition to standard savings, the RESP balance can also be used for investments, which can help the RESP account grow even more.
If you’re approved to receive a CESG grant, the federal government will deposit the grant directly into the RESP account.
The money put into an RESP account is associated with one child. Parents of multiple children typically open up an individual RESP account for each child.
The CESG grant is deposited directly into your RESP account. The RESP account cannot be accessed until the child in question has graduated from high school and is attending a registered post-secondary institution. The funds can then be withdrawn and used for education and education-related expenses.
If the child delays post-secondary education, the subscriber can continue to use the account as a tax-sheltered savings account and keep it open for up to 35 years.
If the RESP account is closed and the child has not chosen to attend college, then you will be required to return all of the CESG grant money and will be required to pay capital gains tax on the RESP’s account gains.
The CESG is an annual grant that is deposited into eligible RESP accounts. The standard CESG grant is 20% of the RESP subscriber’s contribution, up to $2,500. This means that the maximum you can receive from a CESG grant is $500 per year.
If you contribute less than $2,500 per year to the RESP account, then the grant will reflect 20% of this. For example, if you contribute $1,000, the CESG grant would be $200.
The total CESG grant that an individual RESP account can receive over its lifetime is $7,200.
If you delay opening an RESP account for your child (say, when they’re 7 years old), you can catch up on back payments for previous years, as long as you were eligible based on your income.
The majority of CESG recipients are eligible to receive up to $500 per year in CESG grants paid to the RESP account. However, certain lower-income families are eligible to receive an additional grant of 10% or 20% paid in addition to the first $500 CESG grant.
If you’re contributing the maximum $2,500 per year to the child’s RESP account, then you’ll receive an additional $50 or $100, based on the parents’ or guardians’ income:
- If adjusted income is $50,197 or below: $100 additional grant allowed
- If adjusted income is between $50,197 and $100,932: $50 additional grant allowed
CESG grants can be issued to RESP accounts through December 31st following the child’s 17th birthday. For example, if they turn 17 in July, their RESP account will still receive a final CESG grant at the end of the year.
To receive a CESG grant, the child must have a RESP account set up. The account must not have a $0 balance and must show past contributions.
Additionally, they must:
- Be a full-time resident of Canada
- Have a Social Insurance Number (SIN)
Applying for a CESG grant is relatively simple. Here’s how.
Before you’re eligible to receive a CESG grant, there must be an existing RESP account set up in the child’s name.
Once you’ve opened an RESP account and made your first deposit, you’ll need to gather your personal documents, such as your SIN. If you are not the direct parent or guardian of the child, you’ll also need the child’s SIN number.
To complete the CESG grant application, you’ll need to work with a registered RESP promoter. You can view Canada’s list of registered RESP promoters here. You’ll work with the promoter, who will guide you through the application process and handle your case.
If it’s approved, you’ll receive the first CESG grant at the end of the year.
Maximizing your RESP contribution to receive the maximum CESG grant is an excellent plan to help your child receive up to $7,200 in lifetime grants from the Canadian government. This money can be used for any and all school-related costs, which not only helps your child but also takes the financial strain off of the parents’ shoulders as well.
Looking for more great ways to start saving for the future? Check out my guide to saving money on groceries in Canada next!