The federal government introduced the RESP nearly 50 years ago to help families save for their kids’ post-secondary education. The big draw for parents: Investment growth inside an RESP was (and still is) tax-sheltered. You can contribute up to $50,000 per child into an RESP, and the account can stay open for up to 35 years.
In the years since the RESP was launched, the government has added grant programs to further encourage families to save.
- Canada Education Savings Grant: The CESG is a matching grant. For the “Basic CESG,” the government will match 20% of your contributions, up to $500 per year. To get the full $500, you would need to contribute $2,500 in a year. If your family’s adjusted income is below a certain amount, you can also receive the “Additional CESG,” which is an extra 10% or 20% on your first $500 per year. The CESG’s lifetime maximum, including any Additional CESG, is $7,200 per child.
- Canada Learning Bond (CLB): Kids born in 2004 or later whose family’s adjusted income is below a certain threshold could get $500 the first year they’re eligible, plus another $100 each year until they reach age 15, if they continue to qualify (based on income). To apply for the CLB, you don’t need to make a personal contribution. The CLB’s lifetime limit is $2,000 per child. This grant is retroactive and kids can still be eligible up to the day before they turn 21.
- British Columbia Training and Education Savings Grant (BCTESG): For B.C. residents only, this grant adds $1,200 to an RESP. You must apply between a child’s sixth and ninth birthdays.
- Quebec Education Savings Incentive (QESI): For Quebec residents only, this grant matches 10% of your annual RESP contribution, up to $250. The QESI’s lifetime maximum is $3,600.
Use an RESP calculator
The RESP is a powerful savings tool because of the CESG and other government grants. To see how they can boost the growth of your savings, try out different scenarios using an RESP calculator. You can change the variables—including the child’s age, initial deposit, monthly contributions and projected rate of return—and see how your savings might stack up against the cost of post-secondary school.
To start saving for your child’s college or university expenses and take advantage of government grants, you can open a plan with an “RESP promoter”—the government’s term for a financial institution that offers RESPs. You can open an individual plan or a family RESP, for multiple kids.
Embark, a Canadian fintech focused on education savings and planning, helps families maximize their savings and government RESP grants. It also manages RESP investments, using a “glide path” approach tailored to your child’s age. So, the closer they get to starting college or university, the more conservative the approach for managing the investments.
Embark has an exclusive offer for MoneySense readers: Start an account using the promo code MONEYSENSE100 and they will contribute $100 to your child’s education when you save $200. Visit Embark* for details.
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