Make the Educated Choice for Your Child’s RESP
As a caring parent, you want your child to enjoy a successful life. Today, that means a post-secondary degree or specialized training is a necessity, not an option.
A Registered Education Savings Plan (RESP), created by the Federal Government to help parents provide full education opportunities for their children, allows you to save up to $4,000 per year per child, to a lifetime total of $42,000 per child in a tax-sheltered plan.
Your savings will grow with the help of special plan features: The Amount of the CESG The amount of the grant is based on your family income. The amount can change over time as your family income changes.
No matter what your net family income is, the grant provides at least 20 cents for every dollar on the first $2,000 of annual RESP savings made on behalf of a child.
Depending on your family income, your child could receive additional grant on RESP savings that you make after 2004 on behalf of a child:
If your net family income is below $35,595*, the grant will be 40 cents for every dollar on the first $500 you save in your child’s RESP each year.
If your net family income is between $35,595* and $71,190*, the grant will be 30 cents for every dollar on the first $500 you save in your child’s RESP each year.
Your net family income is reported on your Canada Child Tax Benefit statement (commonly known as “baby bonus”, or “family allowance”) that you receive from Canada Revenue Agency each July.
*This amount is updated each year based on the rate of inflation.
Lifetime CESG Limits
The most CESG your child can receive is $7,200. This lifetime limit also applies to each individual child when the CESG money is shared with other beneficiaries as in a family RESP.
Note: In this case, “lifetime” means from birth up to the end of the year that the child turns 17 years of age.
Get an additional 20% free
A Canada Education Savings Grant (CESG) is a grant offered by the Government of Canada to encourage parents, family and friends to save for a child’s education after high school. A CESG is paid by Human Resources and Skills Development Canada directly into an RESP in which the child is a named beneficiary.
You’ll benefit from the Canada Education Savings Grant (CESG), a government grant that provides an amount equal to 20% of your RESP contributions. It’s extra money that can add up to $400 per year for each child, to a maximum grant of $7,200 over the life of the plan. The grant money will grow with interest, too.
Enjoy tax-sheltered growth.
RESPs offer tax deferral on the interest earned on your savings over the years. If you were to save outside an RESP, your interest earnings would be subject to tax, greatly decreasing the money available for your child’s education. When you save in an RESP, your contributions and your CESG enjoy compound growth that is tax-sheltered.
When the time comes to withdraw funds from your plan, the money is paid in your child’s name to reduce taxes. Since students have generally low income levels, little or no tax is payable.
Canada Learning Bond
A Canada Learning Bond (CLB) is a Government of Canada grant to help modest-income families start saving for their child’s education after high school. A CLB is paid by Human Resources and Skills Development Canada directly into the RESP of a child who is a named beneficiary and whose parent or guardian is eligible to receive the National Child Benefit Supplement (NCBS).
An RESP is the Best Overall Choice
No other savings option provides as many advantages as an RESP. For example, if you were to save in your RRSP and then withdraw it to pay education costs, you’d have to pay income tax on the full amount you withdraw at your tax rate. With an RESP, the interest earnings are paid in the name of your child. Students have generally low income levels, so little or no tax is payable.
As well, all contributions you make to the plan over the years are returned to you, tax-free. It is the interest this money earns that goes to finance your child’s education. You can’t lose.
Also an RRSP is not eligible for the 20% grant. You’d be passing up extra money.