‎All You Need To Know About The Canada Education Savings Grant (CESG)

The Canada Education Savings Grant (CESG) is the crown jewel of the RESP grants available to Canadian students. It provides people who invest in an RESP with grants of up to $7,200 or more over the lifetime of the RESP. Who doesn’t like $7,200 of free money?!

The Canadian government established the program to encourage families to save for their children’s post-secondary education by providing additional funds for their RESP. By contributing to an RESP, families can receive matching funds from the government as CESG contributions, which effectively boosts their savings over time.

For Canadian families, the CESG helps alleviate some of the financial burden of post-secondary education. With rising tuition costs and the increasing importance of higher education career prospects, saving early through an RESP with the help of CESG contributions can significantly ease the financial strain on families.

 

How Does the CESG Work?

The CESG plays a crucial role in promoting education savings for children by providing a financial incentive for families to start saving early. The grant provides a 20% matching contribution on the first $2,500 of the annual RESP contributions per child, up to a maximum of $500 annually and a lifetime limit of $7,200. Once you reach the lifetime limit, no further CESG contributions will be made.

CESG contributions, like other RESP contributions, are invested and can grow tax-deferred until withdrawn. When the beneficiary enrolls in a qualifying post-secondary program, they can start withdrawing funds from the RESP to cover their educational expenses. The contributions and the investment growth can be used to cover tuition, books, housing, and other eligible expenses.

Types of CESGs

There are different types of grants available in the CESG program. Here’s a breakdown of how they work and the process of applying for them.

Basic CESG

The Basic CESG program rewards you for contributing to your RESP on an annual basis. The government provides a grant of 20% of whatever you contributed, up to a maximum of $500/year. In other words, if you contribute $2,500, the government adds $500 to your RESP. That is like getting an extra 20 cents on every dollar you save!

The maximum CESG grant amount you can receive over the lifetime of your RESP is $7,200.

To qualify for the Basic CESG, the beneficiary, such as the child named in the RESP account, must have a valid Social Insurance Number (SIN) and be a Canadian resident. Additionally, the contributor, usually a parent or guardian of the beneficiary, must open an RESP account for them.

Additional CESG

The Additional CESG program is designed to provide extra support for low and middle-income families. Eligibility for the Additional CESG is based on the beneficiary’s family income as reported on their previous year’s income tax return. It provides an additional 10% or 20% on the first $500 of RESP contributions made annually for eligible beneficiaries. Eligible families can receive up to $100 or $200 in Additional CESG contributions per year, depending on their family income.

Here is how it works:

Net Family Income*	$49,020 or less	More than $49,020 to $98,040	Over $98,040
BASIC CESG Paid on first $2,500 of annual contribution	20% = $500	20% = $500	20% = $500
ADDITIONAL CESG Paid on first $500 of annual contribution	20% = $100	10% = $50	Nil
Annual total grants	$600	$550	$500

*Indexed annually. Numbers shown are based on 2021 adjusted income.

Important to Note: if you receive Additional CESG, the lifetime maximum of $7,200 still applies.

Applying for CESG

After you open an RESP with an eligible provider, complete the necessary CESG application forms. These forms typically include the Canadian Education Savings Grant Application Form and the RESP Beneficiary’s information. Submit the completed forms along with the required documentation, such as a copy of the beneficiary’s SIN and identification for both the subscriber and the beneficiary.

Managing the CESG Funds

Managing CESG funds within an RESP involves considering investment options, monitoring contributions and performance, and understanding the implications of withdrawing these funds. There are different types of investments you can have in an RESP, such as guaranteed investment certificates (GICs), mutual funds, exchange-traded funds (ETFs), and individual stocks and bonds.

Each type of investment offers different returns and risk levels. For example, GICs and savings accounts offer low risk but typically have lower returns compared to other investment options and ETFs offer diversification and lower fees compared to mutual funds. Choosing the right investment option depends on your risk tolerance, time horizon, and investment goals.

It’s important to regularly review your RESP account to monitor CESG contributions, investment performance, and overall account growth. Stay in touch with your RESP provider to ensure you understand how your account is performing and make adjustments if needed. You can review account statements to track CESG contributions, investment returns, and any fees charged.

Benefits of CESG

The CESG is a grant provided by the Canadian government as a financial incentive to help reduce the financial strain of post-secondary education. Families can accumulate significant savings over time with the matching contributions from the program. The CESG funds grow tax-deferred until withdrawn. CESG funds, along with investment growth, can be used to cover various educational expenses. The flexibility allows families to address various aspects of their children’s education needs.

By providing financial support for education savings, families who struggle to afford post-secondary education for their children are empowered to save and invest in their future. The CESG helps foster long-term financial planning and goal-setting. Early planning can have a significant impact on future career opportunities for children.