Maximize Your RESP Contributions
By ATB Financial 8 March 2019 2 min read
As a parent, you want to give your children the best start in life. A Registered Education Savings Plan (RESP) can give your child more opportunities when they’re ready to pursue and pay for a post-secondary education. Your contributions to your child’s RESP will grow tax-free and earn Canada Education Savings Grants (CESG) paid by the government to help your investment grow further.
About the Canada Education Savings Grant
The Canada Education Savings Grant (CESG) is money that the government invests to a beneficiary’s RESP based on the contributions you make into it. It is available until the end of the calendar year in which your child turns 17. The maximum grant funding you can receive over the RESP’s lifetime is $7,200.
Each year, the CESG provides 20 cents on every dollar contributed, up to a maximum of $500 on a contribution of $2,500. If a contribution cannot be made in any given year, you’ll have the opportunity to catch up in future years.
CESG Carry-Forward Room
If you missed making the maximum grant eligible contribution to your child’s RESP and therefore missed receiving the grant, you still have a chance to receive the government match contribution. Catch up on missed grants by making the full grant eligible contribution ($2,500) for the current year and ($2,500) for previous years using “carry forward room”. That means you can make a $5,000 contribution within the calendar year, but can only catch up on missed grants one year at a time per calendar year, until your child turns 17.
So, if you open an RESP for your 5-year-old child, you can contribute $5,000 ($2,500 for the current year and $2,500 to catch up for one of the four previous years) and receive the $1,000 CESG that first year ($500 for the current year and $500 for one of the four prior years). That leaves you with $7,500 of unused carry forward room that you can use one year at a time at $2,500 each time in addition to the current year’s contribution, each year until you have no more carry over room.
If you have a child who was born before 2007 and wish to use carry forward room for years prior to 2007, you will have to abide by the older maximum contribution and carry forward limits. Between 1998 and 2006, the contribution required for the basic CESG was $2,000 with $400 granted by the government. All the same rules apply when it comes to carry forward room for those years, but the limit is $800/year based on $400 for one year and $400 for the year before (both years being prior to 2007). If you are using carry forward room for years after 2007, the above chart explanation applies. For more information and helpful charts, visit the Government of Canada's Grant Room (Carry Forward) information page.
Have more questions? Don’t hesitate to get in touch with an ATB Financial Advisor and learn how you can earn the most from your education savings plan.