CESG Contributions: How to Catch Up & Maximize The Benefits

The Canada Education Savings Grant (CESG) is one of the most valuable tools families can use to grow their Registered Education Savings Plan (RESP). But to maximize these RESP benefits, you’ll need to plan strategically to avoid going over your contribution limits, even if it requires some catch-up work.

Whether you’re just starting to contribute to an RESP or need to make up missed contributions, this guide walks you through how CESGs work, how to recover unused CESG room, how to structure your deposits, and more.

CESG Basics & Contribution Formula

The CESG is a grant provided by the federal government of Canada. This government grant matches 20% of your RESP contributions, up to a maximum of:

• $500 per year, per eligible beneficiary.
• $7,200 lifetime maximum per beneficiary.

This means if you contribute $2,500 each calendar year, you’ll receive your entire $500 CESG contribution for that year. One thing to note is that any contributions beyond this $2,500 in any given year, you won’t receive more CESG, unless you’re catching up on grants that weren’t collected in previous years. Don’t worry, we’ll explain this more in a bit.

Although there is no annual contribution limit, using this $2,500 formula ensures that you’ll reach your CESG maximum. Additionally, know that there are other grants available, such as the Canada Learning Bond (CLB) for low-income families and other provincial grants like the British Columbia Training & Education Savings Grant (BCTESG).

Annual & Lifetime Contribution Limits

While the Canada Education Savings Grant has a limit of $7,200 per beneficiary, the RESP has a lifetime maximum of $50,000 per child, regardless of who contributes to the RESP or how many separate accounts are opened for that child.

If you go over the $50,000 limit for your child’s education, you will be subject to a 1% tax penalty from the Canada Revenue Agency (CRA) per month on the excess amount until it’s withdrawn from the RESP account.

Example of the 1% Tax Penalty

If you accidentally contribute $52,000 to your child’s RESP, the $2,000 would cost you $20 a month in penalties until you fix the over-contribution.

To avoid this, it’s important to track your contributions across all plans and all contributors, especially if you have a family plan.

Unused CESG Grant Room Explained

As we briefly mentioned, if you contribute less than $2,500 in a calendar year, the unused grant room can be carried forward and collected in future years. This means you won’t lose out on the opportunity to receive the CESG amount in full.

How it Works

Let’s say you contributed $1,000 in 2023. You would then receive $200 in CESG. The remaining $300 in the CESG room for that year can be carried forward to 2024 or other years until your child turns 17. So, if you have missed RESP contributions, plan your catch-up contributions carefully to ensure you don’t miss out on your full grant money.

Catch-Up Strategy: Doubling-Contributions

The CESG has a catch-up system that allows you to contribute up to $5,000 in one calendar year to receive up to $1,000 in CESG. However, this only applies if you have contribution room available.

Here’s How to Do It

1. Check how many years you contributed less than $2,500
2. Multiply the number of years by your unused CESG amount.
3. In a future year, contribute $2,500 to get $500 in CESG.
4. Add another $2,500 to claim $500 CESG from a past unused year.
5. Together that’s $5,000 in contributions and $1,000 in CESG grants.

Example

Let’s put this step-by-step into practice with an example:

A family doesn’t contribute to their child’s education account in 2023. So, in 2024, they contribute $5,000:

• $2,500 = $500 CESG for 2024 contributions.
• $2,500 = $500 CESG catch-up for 2023.
• Total: $1,000 in CESG earned in one year.

Note: You can only catch up one year at a time. Therefore, if you’re behind three years, the maximum CESG you can earn in any calendar year is still $1,000.

Age 16–17 Eligibility Conditions

Many families assume they can contribute to an RESP and receive government grant money up until their child turns 17. However, CESG eligibility ends on December 31 of the year a child turns 17. Additionally, other criteria must be followed in the final two years for the beneficiary to continue to receive CESG:

• At least $2,000 was contributed to the RESP by the end of the year they turn 15. Or;
• At least $100 was contributed in any four separate calendar years.

If these requirements are not met, the child will be ineligible to receive the CESG when they are 16 and 17, even if you contributed money into your RESP during those years.

Maximizing Grants with Lump-Sum vs Monthly Deposits

There are two common ways Canadians can contribute to an RESP account: with an annual lump sum payment or with monthly contributions. Both work just fine, and the one you choose will depend on your personal preferences and budget.

Option 1: Lump Sum

This is a great option if you have seasonal income coming in:

• Contribute $2,500 all at once.
• Receive $500 CESG after you make your deposit.

Option 2: Monthly Contribution

This ensures you’ll hit the full CESG contribution threshold by the end of the year:

• Set up $210 monthly automatic transfers.
• After 12 months, you’ll have contributed $2,520.

Embark automatically requests CESG from the government of Canada after each deposit is made for our subscribers. So, you don’t need to apply for the CESG separately; all of the details are handled on your behalf. Depending on your RESP provider, you may be responsible for the initial application required to begin receiving the grant.

Note: If you’re trying to play catch-up, a lump sum deposit will give you more control. But if you’re looking for consistency, monthly deposits will help you avoid forgetting to contribute before the end of the calendar year.

Family Plans, Beneficiary Changes & Grant Transfers

There are two types of RESPs: individual plans and family plans. Family RESP accounts can make planning for post-secondary education easy, especially if you have more than one child.

Family RESP

• The $50,000 contribution limit still applies to each beneficiary.
• CESG is calculated per child, even though contributions go into the same account.
• If one child doesn’t pursue post-secondary education, CESG may be transferred to another sibling. Note that limits do apply.

Important

If a beneficiary doesn’t enrol in a post-secondary program, any grant money will need to be returned to the government of Canada. If you have a family RESP grants can be transferred to their sibling, if they have grant room available.

Common Mistakes & How to Avoid CESG Repayments

Many Canadian families make mistakes with their RESP accounts due to a lack of knowledge about RESP rules.

To avoid these mistakes, here are some of the most common ones that occur:

• Exceeding the maximum amount and triggering the 1% tax penalty.
• Withdrawing contributions too early (before your beneficiary’s education begins) and forcing CESG repayments to the government.
• Overlooking the age 16–17 eligibility rules.
• Failing to track unused CESG grant room and missing out on the lifetime CESG limit.

Best Practices

• Always check your contributions before December 31 to ensure you meet the minimum contribution limit to receive the annual CESG match.
• Set calendar reminders or opt in for notifications from your RESP provider.
• If you have a family plan, coordinate with other contributors to avoid over-contributing.
• Use a grant tracking sheet or app to stay organized over the years.

Quick Tools & Next Steps

To make the most out of your annual RESP contributions and CESG matches, here’s a quick checklist to help you get started:

• Check how much CESG you’ve received so far.
• Log in to your CRA My Account to see your RESP grant room.
• Confirm each eligible child has a valid social insurance number (SIN) and that it’s been listed as a beneficiary on your account.
• Set up $210 monthly auto deposits or plan your annual lump sum payment.
• Ensure your RESP is with a provider that applies for eligible CESG matches automatically on your behalf.
• Track your grant progress using a spreadsheet or online app.
• Set a December 15 reminder each year to make final top-ups, if needed, into your account.
• Use Embark’s RESP calculator to explore different contribution timelines and see how your CESG growth will look over time.

Final Thoughts

CESG grant money is one of the best tools out there for Canadian families who want to plan for their child’s future education. Whether you choose to contribute monthly or annually, what matters most is consistency over the years to ensure you don’t leave any government money behind.

If you need help mapping out your RESP strategy, take advantage of Embark’s online tools or connect with a financial advisor for personalized assistance today.