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 five-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.
For children aged 16 or 17, there are some eligibility restrictions. To receive the CESG, they must meet at least one of the following conditions before the end of the calendar year they turn 15:
- At least $2,000 is contributed to the RESP
- A minimum annual contribution of $100 is made to the RESP in any four previous years
Have more questions? Don’t hesitate to get in touch with an ATB Wealth financial advisor and learn how you can earn the most from your education savings plan.