The Canada Education Savings Grant (CESG) is a valuable program that can significantly boost your child’s education savings. This government initiative offers up to $7,200 in free money to help families prepare for the rising costs of post-secondary education.
This article will explain the key aspects of the CESG, including eligibility requirements, contribution strategies, and how to make the most of this grant.
What is the CESG?
The CESG is money the government adds to your child’s Registered Education Savings Plan (RESP). It’s meant to help families save for their children’s education after high school. The government will match 20% of your RESP contributions up to a certain amount each year.
Who Can Get the CESG?
Any child under 18 who lives in Canada and has a valid Social Insurance Number can get the CESG. The child must have an RESP set up in their name. Parents, grandparents, or anyone else can open an RESP and contribute to it.
How Much Can You Get?
The basic CESG gives you 20% on the first $2,500 you put into an RESP each year. That’s up to $500 per year. The lifetime limit for each child is $7,200. If you can’t contribute the full $2,500 in one year, you can catch up in future years.
Extra Help for Lower-Income Families
Families with lower incomes can get extra CESG money. Depending on their income, they might get an extra amount on the first $500 contributed each year. This is called the Additional CESG.
When to Start Contributing
You can start getting CESG as soon as you open an RESP for your child. The earlier you start, the more time the money has to grow. You can get CESG until the end of the year your child turns 17.
How to Apply
You don’t need to apply for the CESG separately. When you open an RESP, you can ask the provider to apply for the CESG for you. Make sure to fill out all the necessary forms.
Using the CESG Money
The CESG money, along with your contributions and any investment growth, can be used for many types of education after high school. This includes universities, colleges, trade schools, and apprenticeship programs.
If Your Child Doesn’t Continue Education
If your child decides not to continue their education after high school, you might have to return the CESG money to the government. However, you keep any investment earnings, although you’ll have to pay tax on them. You can also use the RESP for another child or transfer your contributions to your RRSP.
Maximizing the CESG
To get the full $7,200 CESG, you need to contribute $36,000 over the years. If you start early and contribute $2,500 per year, you can reach this in about 14.4 years. Planning your contributions can help you make the most of this grant.
CESG and Taxes
The CESG money grows tax-free in the RESP. When it’s withdrawn for education, it’s taxed as part of the student’s income. Since most students have low incomes, they often pay little or no tax on this money.
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17 RESP Facts and How To Get $7,200 For Your Child’s College Education
