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RESP Basics

When To Start Saving For Education


As a champion of your child’s success, you want to ensure you’ve budgeted and saved as much as possible to save them from the burden of substantial student debt. While the price of education is high, investing early and often can help get you there, even if that means investing just a little to start.

Why it Pays to Start Your RESP Early

The earlier you start saving in your RESP, and the more consistently you contribute, the more the investment income on your principal, grants and earnings will compound over time. This means you’ll typically have more to withdraw. 

Starting Early Enables You to Maximize Your Grant Allowances

RESPs are all about getting the government match contributions that kick in when you contribute to your child’s RESP. They pitch in up to 20% of whatever you contributed and, if you qualify for the Additional CESG or Canada Learning Bond, they pitch in even more. The maximum grant you can receive throughout the entire lifespan of your RESP is $7,200 per child and the maximum you can receive per year is $500 or $600 if you qualify for the Additional CESG. So, some simple math shows that if you contribute $2,500/year for approximately 15 years, you will maximize your grant money. 

$2,500 x 20% = $500

$500 x 14.4 years = $7,200

It’s Never too Late to Start Saving for an RESP

Even if you’re starting to save later, the most important step is to take the leap and start saving. Your savings will grow and compound over time, giving your child money to put towards their education.

Say you didn’t set up an RESP until your child was older, or have contributed less than $2,500. Is that lost money? No way! You can carry-forward unused amounts, which is super helpful for catching up. But, it’s important to remember that the maximum grant you can receive each year, including a carry-forward amount, is $1,000 no matter how much contribution room you have ($1,100 if you are eligible for Additional CESG). So you can’t, for example, contribute $0 for two years and then in Year 3 contribute $7,500 and expect $1,500 in grant money. Since that would exceed your annual contribution limit, you would only receive $1,000 in grant money.

If you want to open an RESP but may not be ready financially to contribute, the Canada Learning Bond (CLB) gives eligible families a $500 grant contribution to their RESP without having to deposit any savings themselves. As long as you remain in the income bracket from eligibility, the grant will continue to contribute $100 every year, to a lifetime max of $2,000.

It’s never too late to start an RESP, but it can affect benefiting from government grants. To be eligible for the 20% top-up, the government requires that you start to save in your RESP before the end of the calendar year in which the child turns 15 years old (see RESP Age Limit rules). And, as we mentioned, there are annual maximums that limit the amount of grant money you can receive with large lump sum contributions.

So, start as early as possible and contribute as frequently as you can, even if that means saving a small amount to start.

Written by Embark

Embark is Canada’s education savings and planning company. The organization aims to help families and students along their post-secondary journeys, giving them innovative tools and advice to take hold of their bright futures and succeed.