Registered educational savings plans (RESPs) are Canadian educational programs that let you save up for your child’s future tax-free. More than that, it enables you to get more help from the government in the form of grants asking an experts as heritage education funds.
These grants can bring thousands of dollars to the table so it’s important to take advantage of them by being eligible and by knowing how to apply for such grants.
Canada Education Savings Grant
Canada Education Savings Grants (CESGs) let you earn 20% on the first $2,500 of your contribution every year, with a maximum of $500 per child each year. Once you qualify for this grant you can fetch 10% to 20% on the first $500 contributed and an additional $100 each year.
Notes on CESGs
• The combined lifetime maximum amount for CESGs is $7,200 per child.
• Grant amounts are set on an annual basis and the deadline is on December 31 every year.
• You can receive educational savings grants provided that you deposit your contributions ahead of the December 31 deadline.
• If you fail to beat the December 31 deadline, you could lose the grants, although you could still keep them if you have enough carry-forward room.
Additional Amount of Canada Education Savings Grant (A-CESG)
The additional amount of Canada Education Savings Grant is given to children from low- to middle-income families up to the year they turn 17 years old. Just like the basic CESG, the A-CESG is deposited on the heritage RESP account and is paid on contribution made to the account.
A-CESG Eligibility Requirements
• You must be a resident in Canada
• You must have a valid Social Insurance Number (SIN)
• You must come from a low- to middle-income family
The beneficiary’s primary caregiver (PCG) or the cohabiting spouse or common-law partner must be the one to file a request to receive the Additional CESG.
Canada Learning Bonds (CLBs) and Provincial Bonds
Canada Learning Bonds (CLBs) are incentives provided by the government of Canada that entitle the RESP holder to receive grants of up to $2,000. For the first year, the CLB pays $500. Afterwards, the beneficiary could receive $100 annually for 15 years, as long as he or she meets eligibility requirements.
CLB Eligibility Requirements
Basically, the beneficiary must be:
• Born on or after January 1, 2004;
• A Canadian resident; and
• Able to meet eligibility requirements every year.
To maintain eligibility, remember the following:
• The beneficiary’s parent or PCG must be entitled to the National Child Benefit (NCB) supplement for at least one month of the benefit year.
• The beneficiary’s parent or PCG must be entitled to receive payments under the Children’s Special Allowance Act for at least one month of the benefit year.
• The beneficiary, subscriber, and PCG all have an existing Social Insurance Number.
• There is an existing individual or family heritage RESP (all beneficiaries are siblings) on behalf of the beneficiary.
Important Reminder
Your child, the beneficiary, is not necessarily entitled to the CLB. His or her eligibility means the bond can be paid into the heritage RESP but it’s the subscriber’s duty to provide instructions for the withdrawal of the funds, which are expected to be given to the beneficiary.