This article is brought to you by insurance for children, Canada’s leader in financial planning for children and the creator of Child Plan ™ the fastest growing alternative to the RESP. Child Plan, One Plan For Life.
When people become parents, they dream of plans for their future. Most Canadian parents believe that ensuring their children have a good education to become successful is not going to be a small amount of money to save. Year by year tuition, school, fees, and accommodations become harder and harder to pay so parents must start saving as soon as their child is born.
As parents we want to give our children the opportunity to get the best possible education in order to succeed in life. However every year the cost of education continues to climb and saving for the future has become more challenging and more complicated.
To encourage families to save for their children’s future education, the government created in 1998 the Canada Education Savings Grants which tied to the RESP. In this article, you will find relevant information regarding the different types of government grants to help you make sense of a complicated structure of the inter provincial grants system.
In order to promote higher education, the Government of Canada in 1998 created the Registered Education Savings Plan, commonly referred to as the RESP. In this article you’ll find a variety of information regarding the different types of government grants, the Canada Education Savings Grant (CESG) and other options available to parents beyond the RESP, a government program with government rules on where your child can go to school what they can study and how the money you save can be used.
Who Is Eligible For An RESP Grant
Any person contributing to an RESP provider is entitled by default to the CESG which is Canada’s Basic Education Savings grant and is the most common. There are other grants that, on a case-by-case basis, can be accessed by the parent or guardian in order to increase the funds for their children’s post-secondary education, but the CESG is the most common.
Any person making contributions to a child’s RESP is eligible for one or more government grants under certain rules. The child RESP beneficiary must be a resident of Canada and possess a valid social insurance number (SIN).
While the RESP or Registered Education Savings Plan is a government registered account with a financial institution that you can use to deposit funds to save for your child’s post-secondary education, the matching grants called the Canada education savings grant or CESG is available to any child in Canada under the age of 17.
As long as you are a resident of Canada, you’ll be permitted to use the RESP to save your child’s future had received the CESG grants. However, if you leave Canada for a period of longer than six months, the government may consider you a nonresident and require you to close the RESP account and return any CESG grants that you may have received, even if you lost it in the stock market.
While there’s a variety of provincial education savings grants throughout the country, including the Canada education savings grants, CESG, it’s important for parents to note that the Canada education savings grant or CESG is part of the RESP and is only available until your child reaches the age of 18. In the year your child turns 18 you can no longer deposit any more funds into the RESP.
One of the questions we routinely receive is, are there options other than the RESP that will allow me to save for my child’s entire life?
The most well-known and oldest children’s savings plan in Canada is Child Plan ™ which is a participating whole life insurance policy that allows parents to save not only for their children’s future education but also for their entire life.
Unlike the RESP where you can only receive CESG grants until your child is 17, with a Child Plan ™ Participating Whole Life plan your child will receive a tax-free annual dividend for life.
To learn more about Child Plan ™ Participating Whole Life through your child’s future please click here to request a personalized child plan illustration.
How To Maximize Government Grants Or Tax-Free Dividends?
To maximize the Government of Canada CESG grants or Canada education savings grants, you must deposit a minimum $36,000 into the account by the time your child reaches their 18th birthday. While you can contribute up to $50,000 in total through child education and save his account the ESP, there is no benefit to you or your child once you’ve deposited $36,000.
The maximum Canada education savings grant you will receive by the time your child reaches 18 if you deposit $36,000 is $7200. There is nothing contributed to your child or USB account by the government past $7200, any growth in the account will be entirely up to you, your investment knowledge, and the stock market.
With Child Plan ™ Participating Whole Life insurance, if you contribute the same $2500 to your child plan from the day they’re born they will have $66,509.
The question many parents are asking insuranceforchildren.ca is if the grants are only until their child is 17, is the RESP even relevant anymore in the new world?
How To Maximize Government Grants
It is possible to accumulate government grants that help maximize savings goals for children’s post-secondary education.
Each grant has its specifications, rules, and limits, so it is essential to know them in order to access one or more of them.
It is possible to maximize your child’s Canada Education Savings Grants (CESG) from various provincial and federal government departments. However, as you can see from the table below, while it may appear simple, it is complicated as the RESP as well as the CESG, the Canada education savings grants, are government programs and like all government programs come with complicated rules, restrictions, and a variety of government forms to be completed.
With the RESP alone it is up to parents to ensure that the financial institution where they opened the account do not only complete the four different required forms but that they also submit the CESG grant requests on a timely basis.
In short, while the government may wish to give you the Canada education savings grants CESG and while they may wish that you open an RESP, it’s entirely up to parents to ensure that all the documentation is completed properly.
Child Plan ™ Participating Whole Life plan is your private investment. To open a Child Plan, it’s very simple. Once your application has been approved and your Child Plan is set up, your child will receive a tax-free annual dividend for life and they have complete freedom to use that cash value for any education anywhere in the world without restrictions, buy a home, or for anything in life.
With Child Plan, there are no government forms or paperwork to ever file to receive your annual tax-free dividend. All dividends are automatically deposited into your Child Plan every year throughout your child’s life, And there are no government forms, restrictions, or rules when your child is ready to use their child plan for their education and life
Additionally, parents may combine a Child Plan Participating Whole Life which the child can use for anything beyond education with an RESP if that’s what they wish to do.
What RESP Grants Are Available
As we have already mentioned, from the RESP you can get some additional benefits granted by the Canadian government. These grants are available for children at different ages and max out at different amounts depending on the province and purpose. Make sure to read your application carefully, as they can be quite long.
Here are some of them and their main features:
|Name of Grant||Amount||Limit||Eligibility Requirements||Availability|
|Canada Education Savings Grant (CEGS)||20% of up to $2,500 contributed annually with a maximum of $500.||Lifetime limit is $7,200 per child.||Be a resident of Canada.|
Have a valid Social Insurance Number (SIN)
|Until the end of the calendar year in which the beneficiary turns 17.|
|Additional Canada Education Savings Grant (ACESG)||Adds an extra 10% or 20% according to family net income to the basic CEGS.||CESG and ACEGS combined are subject to the $7,200 per child limit.||20% if family net income is below $47,630. |
10% if family net income is between $47,630 and $95,259.
|Until the end of the calendar year in which the beneficiary turns 17.|
|Canada Learning Bond (CLB)||$500 upon opening the RESP. $100 each subsequent year.||$2,000||Children born after January 1, 2004.|
Beneficiaries must be under age 21 at the time of application.
|Up to 15 years.|
|Quebec Education Savings Incentive (QESI)||10% of net contributions paid during the course of the year.||10% of net contributions paid during the course of the year.||Up to a maximum of $250 per year. |
Low and middle income families may qualify to add up to $50 per year based on net family income.
|Beneficiaries must be under 18 years of age.|
Have a valid social security number.
Be a resident of Québec on December 31 of the fiscal year.
|British Columbia Training and Education Savings Grant. (BCTESG)||$1,200 lump sum payment.||$1,200||Beneficiary and his parents must be BC residents.|
Be between 6 and 9 years of age and child born in 2006 or later.
RESP provider must be authorized to offer the BCTESG.
To learn more about Child Plan ™, please visit insuranceforchildren.ca.
This article is brought to you by insurance for children, Canada’s leader in financial planning for children and the creator of Child Plan ™ the fastest growing alternative to the RESP.