The Canada Education Savings Grant is a program that offers parents and guardians a grant for contributing to their child's Registered Education Savings Plan (RESP). The CESG is a great way to help parents save for their child's education and can provide a significant financial boost to their RESP account. By starting early and taking advantage of the CESG program, parents can help ensure that their child has the financial means to pursue post-secondary education. Find out more about CESG grant below.
What is Canada Education Savings Grant (CESG) ?
The Canada Education Savings Grant (CESG) is a program offered by the Government of Canada to help families save for their children's post-secondary education. The program provides a grant of up to 20% of the annual contributions made to a Registered Education Savings Plan (RESP) for an eligible beneficiary. It is designed to encourage parents to start saving early for their children's education by providing them with a financial incentive to do so.
Under the CESG program, the Canadian government matches 20% of the annual contributions made to a Registered Education Savings Plan (RESP) account, up to a maximum of $500 per year, per child. This means that if a parent contributes $2,500 annually to their child's RESP account, they will receive the maximum CESG contribution of $500 per year.
The CESG is available to Canadian residents who have a valid Social Insurance Number (SIN) and who have set up an RESP account for their child. The child must also be a Canadian resident with a valid SIN and be under the age of 18.
How the Canada Education Savings Grant Works ?
The Canada Education Savings Grant (CESG) is a grant program initiated by the Canadian government to help parents save for their child's post-secondary education. Here's how it works :
1) Open an RESP account :
Parents must open a Registered Education Savings Plan (RESP) account for their child with a financial institution such as a bank or credit union.
2) Make contributions :
Parents can make contributions to the RESP account, up to a lifetime maximum of $50,000 per child. There are no annual contribution limits, but there is a limit of $2,500 per year to receive the maximum CESG contribution.
3) Receive CESG contributions :
The Canadian government matches 20% of the contributions made to the RESP account, up to a maximum of $500 per year, per child. This means that if a parent contributes $2,500 annually to their child's RESP account, they will receive the maximum CESG contribution of $500 per year. The CESG contributions are deposited directly into the RESP account.
4) Choose investments :
Parents can choose how to invest the money in the RESP account, such as stocks, bonds, or mutual funds.
5) Use the funds for education :
When the child is ready to pursue post-secondary education, the funds in the RESP account can be used to pay for tuition, books, and other education-related expenses. The contributions and earnings in the RESP account are tax-free when used for educational purposes.
Who is Eligible for Canada Education Savings Grant ?
To be eligible for the Canada Education Savings Grant (CESG), the beneficiary must:
- Be a Canadian resident
- Have a valid Social Insurance Number (SIN)
- Be under the age of 18 when the RESP is opened
- Have an RESP account opened by a parent or legal guardian
In addition, the subscriber (the person who opens and contributes to the RESP account) must be a Canadian resident and have a valid SIN. There are no income requirements to receive the CESG, but the amount of the grant is based on the amount of contributions made to the RESP, up to a maximum of $500 per year per beneficiary.
Contribution Requirements for Beneficiaries who are 16 or 17 years old
However, there are special contribution requirements for beneficiaries who turn 16 or 17 because the CESG was created to encourage long-term savings for post-secondary education. RESPs with beneficiaries 16 and 17 years old may qualify for the CESG if at least one of the two requirements below is satisfied:
- A minimum of $2,000 was put into the beneficiary's RESP (and not taken out) before the end of the calendar year before the beneficiary turned 15.
- At least four of the years preceding the end of the year the child turned 15 saw a minimum yearly payment of $100 made (and not taken out of) the RESP.
This implies that in order for your child to qualify for the CESG, you must start saving for them in RESPs before the end of the calendar year in which they turn 15.
The beneficiary will receive payments from the RESP for educational assistance that include both the CESG and accrued earnings. The CESG is given back to the government if the beneficiary decides against pursuing post-secondary education.
Canada Education Savings Grant Rules
Here are some of the key terms of the CESG:
1) Registered Education Savings Plan (RESP):
The grant is available for contributions made to a RESP, which must be opened by a parent or legal guardian for the eligible beneficiary.
2) RESP Provider:
The RESP provider must be registered with the Canada Revenue Agency (CRA) to administer the CESG.
3) Contribution Limits:
The CESG provides a grant of up to 20% of the annual contributions made to an RESP, up to a maximum of $500 per year per beneficiary. The maximum lifetime grant amount per beneficiary is $7,200.
4) Repayment:
If the beneficiary does not pursue post-secondary education, the CESG must be repaid to the government.
5) No Income Requirements:
There are no income requirements to receive the CESG, but the amount of the grant is based on the amount of contributions made to the RESP.
6) Validity:
The CESG does not expire, but the lifetime limit per beneficiary is $7,200.
7) Withdrawal rules:
If the money in the RESP is used for qualified educational expenses, such as tuition, textbooks, and other education-related costs, then the CESG can be withdrawn tax-free. If the money is not used for qualified expenses, then the CESG portion of the RESP will be returned to the government.
8) Carry forward provision:
The CESG has a carry forward provision. Which allows unused grant room to be carried forward to future years, up to a maximum of $1,000 per year.
It's important to note that these terms are subject to change. It's always best to consult with a financial advisor or the Government of Canada's website for the most up-to-date information.
Who Qualifies for the Additional CESG ?
The additional Canada Education Savings Grant is available to certain families based on their income.
Families with a net income of $50,197 or less may be eligible for an additional 20% CESG on the first $500 contributed to their child's RESP each year. This means they could receive an additional $100 for every $500 contributed, up to a maximum of $1,000 in additional CESG per year.
Families with a net income between more than $50,197 but less than $100,392 may be eligible for an additional 10% CESG on the first $500 contributed to their child's RESP each year. This means they could receive an additional $50 for every $500 contributed.
It's important to note that eligibility for the additional CESG is based on the net income of the primary caregiver (usually the parent) and can change from year to year. It's a good idea to check with the Canada Revenue Agency to confirm your eligibility before making contributions.
How Much is Canada Education Savings Grant ?
The CESG provides a grant of up to 20% of the annual contributions made to a Registered Education Savings Plan (RESP), up to a maximum of $500 per year per beneficiary. The maximum lifetime grant amount per beneficiary is $7,200. This means that if you contribute $2,500 to an RESP in a year, you can receive the maximum CESG of $500 for that year. The grant is automatically calculated and added to the RESP account by the RESP provider.
How to Apply for Canada Education Savings Grant ?
To apply for the CESG, you need to follow these steps:
- Open a Registered Education Savings Plan (RESP) account with an RESP provider that is registered with the Canada Revenue Agency (CRA) to administer the CESG.
- Provide the RESP provider with the Social Insurance Number (SIN) of the beneficiary for whom the RESP is being opened. The beneficiary must be a Canadian resident and under the age of 18.
- Make contributions to the RESP account. The CESG will be automatically calculated and added to the account by the RESP provider, up to a maximum of $500 per year per beneficiary.
- Monitor the RESP account regularly to ensure that the CESG is being applied correctly.
Note that you do not need to apply for the CESG separately. It is automatically applied to the RESP account when contributions are made. However, it is important to ensure that your RESP provider is registered with the CRA to administer the CESG.
Pros of CESG
1) Free money:
The CESG provides free money for children's education savings. Which can help parents and guardians save for their child's post-secondary education.
2) Encourages saving:
The CESG incentivizes parents and guardians to save for their child's education by offering a grant.
3) Accessible:
The CESG is available to all Canadian families with children, regardless of their income or financial situation.
4) Compound interest:
The money in an RESP can grow tax-free. The CESG can help increase the amount of money in the RESP through compound interest.
Cons of CESG
1) Limitations:
The CESG has a lifetime limit of $7,200 per child. Which means that parents and guardians can only receive up to $7,200 in grants for their child's RESP.
2) Restrictions:
The CESG has certain restrictions and eligibility criteria. Which can make it difficult for some families to qualify for the grant.
3) Limited options:
The CESG can only be used for post-secondary education. Which means that families who want to use the savings for other purposes may not find it helpful.
4) Contribution requirements:
The CESG has contribution requirements, and families must contribute to their child's RESP to receive the grant. This can be a challenge for families who are not able to save regularly.
Frequently Asked Questions
Q: How much can I receive through the CESG?
A: The CESG provides a grant of up to 20% of the annual contributions made to an RESP. The grant is maximum of $500 per year per beneficiary. The maximum lifetime grant amount per beneficiary is $7,200.
Q: How do I apply for the CESG?
A: You do not need to apply for the CESG separately. When you open an RESP for an eligible beneficiary, the CESG will be automatically applied to the account. However, you must ensure that your RESP provider is registered with the Canada Revenue Agency (CRA) to administer the CESG.
Q: Are there any income requirements to receive the CESG?
A: No, there are no income requirements to receive the CESG. However, the amount of the grant is based on the amount of contributions made to the RESP. So families with lower incomes may receive a smaller grant.
Q: Can I transfer the CESG to another beneficiary?
A: No, the CESG is not transferable between beneficiaries. It can only be used for the beneficiary for whom it was granted.
Q: What happens to the CESG if the beneficiary does not go to post-secondary education?
A: If the beneficiary does not go to post-secondary education, the CESG must be repaid to the government. However, the contributions made to the RESP can be withdrawn by the subscriber, subject to any applicable taxes and penalties.
Q: When does the CESG expire?
A: The CESG does not expire, but there is a lifetime limit of $7,200 per beneficiary. Once the maximum grant amount has been reached, no further CESG will be paid into the RESP.