How much money does the government contribute to an RESP?

Introduction to Government RESP Support

Let’s face it, saving for your child’s post-secondary education can be overwhelming, especially with the rising cost of tuition fees and other education-related expenses. With this in mind, both federal and provincial branches of government offer incentives to those who open and contribute to a Registered Education Savings Plan (RESP).

RESPs help Canadian families strategize their financial planning and are designed to make post-secondary education more accessible and affordable, and the earlier you start, the more you can benefit from this financial tool. Whether you plan to save money each month or make a larger RESP contribution at the end of each calendar year, taking advantage of government grants is one of the smartest financial moves you can make as a parent, grandparent, or guardian.

The Canada Education Savings Grant (CESG)

The Canada Education Savings Grant (CESG) is one of the key government grants offered to RESP account holders. At its core, CESGs are a matching program that rewards you with money each time you make a RESP contribution.

How do CESGs work?

To receive the CESG, contributions must be made to your RESP. If eligible, the federal government matches up to 20% of your annual contributions, which amounts to up to $500 per year. That means you’d need to contribute $2,500 annually to your RESP. Over time, this can amount to a lifetime limit of $7,200 from this grant. Note, there is no annual limit you can contribute to an RESP.

Additional RESP Government Grants for Low-Income Families

If your family falls into a lower or middle income tax bracket, you may be eligible to receive up to an additional $100 in grant money from the government on the first $500 of annual contributions.

The Canada Learning Bond (CLB)

The Canada Learning Bond (CLB) is another way the Canadian government is committed to helping children from low-income families pursue post-secondary education. Unlike the CESG, you aren’t required to contribute to an RESP to receive CLB money, but you must be actively receiving the Canada Child Benefit.

How does the CLB work?

If you’re eligible for the CLB grant money, the government will contribute up to $2,000 (the lifetime maximum) to your child’s RESP. $500 will be deposited into the RESP account the first year your child qualifies and an additional $100 per year until your child turns 15.

Provincial Grants

Additional provincial grants are available, depending on which province you and your family reside in:

Quebec Education Savings Incentive (QESI)

The Quebec Education Savings Incentive (QESI) matches 10% of your RESP contributions. This provides an additional boost to your education savings up to a maximum of $250 per year per child and a lifetime maximum of $3,600 per child.

British Columbia Training & Education Savings Grant (BCTESG)

The British Columbia Training & Education Savings Grant (BCTESG) is a one-time payment of $1,200 into the RESP of eligible children born on or after January 1, 2006, in British Columbia.

How to Maximize Your Government Grants

Getting the most out of your registered education savings plan (RESP) and government contributions is all about time. Here’s what you need to do:

Start Saving Early

The earlier you contribute to an RESP, the more time your savings and grants have to grow. Even if you start saving small amounts when your child, the beneficiary, is first born, starting early can make a big difference thanks to compound growth.

Carry Forward Your Contributions

If you’re unable to contribute to your RESP for the year, your contribution room can be carried forward in future years, so you don’t miss out on your CESG grant matching.

For example, the government will allow you to earn up to $1,000 in CESG per year when you contribute $5,000, which includes your current year’s grant and what was missed in previous years.

Low and Middle Income Families: Claim Your CBL

Even if you’re unable to contribute to a registered education savings plan (RESP) when you first open it, if your family’s income qualifies for this additional grant money, your child can still receive up to $2,000 in additional funds.

RESP Grant Eligibility Criteria

To qualify for RESP grant money, the following criteria need to be met:

• Your child must be a Canadian resident and have a valid social insurance number (SIN).
• The RESP must be opened through an approved RESP provider, such as a financial institution or education savings provider, like Embark.
• Whether or not RESP beneficiaries qualify for additional grants will depend on your total family income.

Pro tip: Open a RESP for your child’s education as soon as your child has a SIN, even if you aren’t able to make an RESP contribution right away. That way, you can begin collecting grant money as soon as you’re ready to contribute.

Example Scenarios of RESP Government Funding

One of the invaluable benefits RESP accounts offer is flexibility. Let’s look at how RESP grants can work in different scenarios:

Scenario 1: Moderate-Income Family Contributing $2,500/year

Jessica and Adam make an effort to contribute $2,500 to their daughter’s RESP account every year starting from when she was born. Each year, they qualify to receive the full $500 in CESG money.

Over the next 15 years, they receive the lifetime maximum of $7,200 CESG, on top of their $37,500 in personal contributions, which their daughter can now put toward an eligible educational institution.

Scenario 2: Low-Income Family Receiving CLB and CESG

Hailey is a low-income, single parent who qualifies for the CLB and receives the Canada Child Benefit. She opens an RESP for her son when he is born and gets $500 from CBL. Every following year, she gets an additional $100 until her son turns 15. Note that there is no age limit for individual RESP accounts.

Even though she can only contribute $500 annually, she still receives an additional CESG of 40% on the first $500 ($200 per year), given that she is in the lowest tax bracket. This means Hailey receives a total of $2,000 in CLB and $3,000 in CESG over the years, bringing her total government support to $5,000, on top of her total contributions.

Scenario 3: Family Catching Up on Unused Grant Room

Rebecca and Sam didn’t contribute to their twins’ RESPs during the first three years of their lives. However, once they went back to work and their finances improved, they started contributing $5,000 per child annually.

Thanks to the RESP catch-up rules, they receive $1,000 in CESG per year (in the first few years) to make up for the previous years. Over time, they’re able to reach the $7,200 CESG limit.

Don’t leave 20% on the Table

If you’re saving for your child’s education, an RESP is a valuable tool, especially when you factor in the 20% government grant matching that helps to maximize your savings. The best way to do so is to start early and contribute consistently over the years.

Embark is here to help you along the way, so you can take full advantage of the financial opportunities available to you. Don’t miss out on free money, open an RESP with Embark today!