In Canada, parents often use a Registered Education Savings Plan (RESP) as an effective means to save for the post-secondary education of their children.
The strategy has been encouraged over the years by the federal government, which first introduced tax incentives in 1972 to parents who opened an RESP for their children. In 1998, the government introduced the Canada Education Savings Grant (CESG) and in 2004 announced Additional CESG (ACESG) and the Canada Learning Bond (CLB). These incentives were established to promote access to post-secondary education to all Canadian families, with the ACESG and CLB particularly focused on promoting access to those who come from low-to-medium income homes.
Making higher education accessible to all Canadians is the mission of CST Consultants, as well as being one of the leading providers and distributors of RESPs. CST Consultants notes that not all parents are taking advantage of grant money, either because of a lack of understanding regarding what is available or how to apply.
Canadian families can apply for the following grants to boost their RESPs:
- The Canada Education Savings Grant : this is federal grant money specifically made available for those who open and make contributions to RESPs. How much grant is available depends upon the contributions made to an RESP throughout the year. The CESG adds 20 cents for every dollar a family puts into an RESP, up to $500 per year per child. This grant is available until the child turns 17. One of the best features of the CESG is that any amount that is not collected in a year can be carried over to future years. This means if you do not make enough contributions in a year to receive the full $500, that money will still be available to you next year.
- Additional Canada Education Savings Grant: this is federal grant money intended to help boost RESPs for middle to low-income families. The grant can provide an additional 10 or 20 percent on the first $500 contributed.
There is a total lifetime sum of $7,200 of CESG and Additional CESG per child that can be accessed.
- Canada Learning Bond (CLB): Through this bond for low income families, the Canadian government will contribute up to $2,000 per child. $500 of this money is put into the RESP in the first year of eligibility. Another $100 is added for every year the child is eligible until they turn 15. The best feature of the CLB is that no contributions need to be made in order to receive the government money. For families who are eligible, the Canadian government will also contribute an extra $25 to help cover the cost of opening an RESP.
- Provincial education savings incentives: Families who live in British Columbia can access potential grant funds from the B.C. Training and Education Savings Grant (BCTESG). They offer families an extra lift to help with the cost of post-secondary education.
Given Canada’s competitive career landscape, a post-secondary education remains crucial to building a child’s future, despite growing educational costs. The grants provided by the federal and provincial governments are just one more incentive to start building that nest egg today.