Canada Education Savings Grant (CESG) Explained

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 of funding your child’s education.

 

How Does the CESG Work?

The Canada Education Savings Grant plays a crucial role in promoting education savings for children by providing a financial incentive for families to start saving early. According to the Government of Canada, 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CESG contributions, like other RESP contributions, are invested and can grow tax-deferred until withdrawn.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 two different types of grants available in the Canada Education Savings Grant program. Here’s a breakdown of how they work and how to qualify.

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 amount you can receive for the CESG grant 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.

A beneficiary can receive the Basic CESG until December 31 of the year they turn 17. However, if your beneficiary is 16 or 17, they’ll only be eligible if one of the following conditions is met:

• At least $2,000 was contributed to their RESP by December 31 of the year they turned 15, or
• Minimum contributions of at least $100 were made in any four years before December 31 of the year they turned 15.

Additional CESG

The Additional CESG program is designed to provide extra support for low-income and middle-income families. 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.

Eligibility for the Additional CESG is based on the beneficiary’s adjusted family net income as reported on their previous year’s income tax return.

Here is how it works:

Net Family Income*	$55,867 or less	More than $55,867 to $111,733	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 2024 adjusted income.

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

Applying for the CESG

Here’s how to apply for the CESG:

1. Open an RESP

To receive the CESG, you must apply through your RESP provider. If your application is approved, this is where the government will deposit the grant money. If you don’t already have an RESP, you’ll need to open one and begin making contributions before applying.

2. Gather your personal information

The person applying (called the subscriber) must provide their SIN and signature on the application form, along with the child’s SIN. If the subscriber isn’t the child’s primary caregiver, additional forms may be required.

3. Fill out the CESG application form

Ask your RESP provider for the CESG application form. Complete it in full and return it to them. They’ll send the completed form to the Government of Canada for processing. Once approved, the government will deposit the CESG into your RESP within 65 days of your contribution, as long as you’re eligible.

Benefits of Applying for the CESG Grant Early

The Canada Education Savings Grant offers long-term financial and educational benefits that make it one of the most valuable tools for families planning for a child’s future education. By taking advantage of this government grant early, families can significantly reduce the financial burden of post-secondary education and set their children up for long-term success.

The Government Has More Time to Match Your Contributions

The Canada Education Savings Grant provides a 20% matching on the first $2,500 contributed annually to a Registered Education Savings Plan (RESP), up to a lifetime maximum of $7,200 per child or until the year the child turns 17 years old. That means for every dollar you contribute, the government adds 20 cents. This is free money toward your child’s future!

If you open your RESP when your child is born and contribute $2,500 each year, it will take 14.4 years to reach the maximum amount of $7,200.

Now, while you can potentially receive up to $1,000 in a year if you have unused grant room from previous years, that would require you to invest $5,000 a year to catch up. By starting early, you only need to deposit $2,500 each year to reach the maximum amount.

The CESG Can Grow Further with Compound Interest

Starting early has a compounding advantage. When CESG funds are invested within an RESP, they grow tax-deferred until withdrawal. This allows contributions, government grants, and investment earnings to accumulate more quickly over time.

If you deposit $2,500 each year, you’ll earn compound interest on that initial investment plus what it makes over time. But with the GESG, you’ll be receiving an extra $500, which means you’ll earn compound interest on $3,000 instead of $2,500.

The earlier you begin saving, the longer your investments have to grow.

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.

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.

Tracking Your Contributions

It’s important to regularly review your RESP. Monitor your contribution levels to ensure you’re maximizing CESG eligibility each year. Remember, you can earn up to $500 per year in CESG (or up to $1,000 if there is unused room from previous years), so tracking your contributions helps you take full advantage of the grant.

 

What Can CESG Funds Be Used For?

Canada Education Savings Grant funds can be used to help pay for a wide range of expenses related to post-secondary education. These funds are meant to support the beneficiary’s education and ease the financial burden on families.

Here’s what CESG funds can be used for:

• Tuition and fees for eligible post-secondary institutions
• Textbooks and supplies
• Housing and living expenses, like rent, utilities, and groceries
• Transportation expenses, like public transit, fuel, or even travel back home during breaks
• Technology and equipment needed for school, like a laptop, software, or tools

How to Access CESG Funds

To access CESG funds, the student must be able to show proof of enrollment in a qualifying full or part-time program at one of the following post-secondary institutions:

• Universities and colleges
• CEGEPs in Quebec
• Trade schools and technical institutes
• Some abroad programs (as long as they meet the eligibility criteria)

Whether it’s a four-year degree, a one-year certificate, or an apprenticeship, as long as it’s recognized by the Canadian government, it may qualify.

Once they meet this condition, Educational Assistance Payments (EAPs) can be withdrawn from the RESP, which include the CESG, your earned interest, and any other grant money.

These EAPs are taxable in the hands of the student, who often has little to no income and may pay minimal or no tax. To make an EAP withdrawal, your RESP provider will require your child to provide official proof of enrollment. In some cases, they may request receipts to confirm that the money is being spent on approved education-related costs.

What Happens to the CESG if Your Child Doesn’t Pursue Post-Secondary Education?

If your child decides not to pursue post-secondary education, any CESG amounts received must be returned to the Government of Canada.

However, it’s important to note that the RESP can remain open for up to 35 years, so your child has a significant amount of time after graduating from secondary school to still use their RESP funds, including the grant money, if they decide to pursue their education later in life.

But if the funds haven’t been used by the time they turn 35, the RESP account must be closed, and the CESG money must be returned.