Lower The Costs of Education With A REGISTERED EDUCATION SAVINGS PLAN (RESP)
You want the best for your children. The truth is, the best can be expensive. The Government of Canada has 3 ways to help you save for your child’s education. Here's what you need to know to take advantage of their RESP funds.
Registered Education Savings Plan (RESP)
As soon as your child is born, you can open a Registered Education Savings Plan (RESP) account. An RESP is a Government-approved plan to help you or your family save into a plan dedicated to your child’s post-secondary education. Anyone in your family can contribute up to a lifetime limit of $50,000, with all savings growing tax-free until withdrawal.
RESP Language 101
A 'beneficiary' is a child (or the recipient) whose education you are saving for.
- A 'subscriber' is the registered owner of the plan is eligible to make contributions to the RESP.
- An 'Individual Plan' is set up by a subscriber for one beneficiary.
- A 'Family Plan' is set up by a subscriber on behalf of one or more beneficiaries.
Canada Education Savings Grant
Under the Canada Education Savings Grant (CESG), the Government matches 20% of the first $2,500 of annual RESP contributions that you make - shaking out at 20 cents on every contributed dollar or a maximum of $500 if the full amount is contributed. The grant caps out at a lifetime maximum of $7,200, meaning you can access it for roughly 14 years of savings.
If you can't contribute in any given year, the unused entitlement can be carried over to the next year. Additional CESG may also be available depending on your family income, the income levels change each year so it is best to check in on their website for the latest information.
How To Apply To Receive CESG:
Gather personal information (the SIN number of the child and subscriber).
- Book an appointment with a First Calgary personal banker to open an RESP.
- We'll help you complete an application form in the branch.
- Check to see that the grant has been deposited with the 65-day window.
Canada Learning Bond
This $500 Canada Learning Bond (CLB) is money (up to a maximum of $2,000) that the Government adds exclusively to a child's RESP to help low-income families start saving for a child's education. This money can be used to pay for full-time or part-time studies in:
- Apprenticeship programs;
- Trade schools
Children born after December 31, 2003, are eligible and may qualify for $100 every year up to and including the year that they turn 15 years old. What's great, is that it can be used in conjunction with your own savings and CESG access, as no personal contributions are required to receive it. We encourage you to check your eligibility against the current income requirements.
Using the Funds In An RESP
When the named beneficiary on the RESP enrolls in a qualifying post-secondary educational program lasting longer than 3 consecutive weeks, provide proof of enrollment to your RESP provider who can arrange for the withdrawal of RESP funds as Education Assistance Payments. These payments can cover education-related expenses such as tuition fees, textbooks and accommodations and are considered as income by the Canada Revenue Agency. This means the beneficiary will need to declare this on their T4A income tax form, however as income is often limited while in school, they may not be required to pay any income tax on the withdrawn payments.
What happens if your child chooses not to attend post-secondary education?
- Leave the funds in an RESP for up to 36 years (in case they change their mind!)
- Choose an alternate beneficiary
- Transfer the amount to an RRSP or an RDSP
- Withdraw your contributions and close the RESP. This entails returning any grants and bonds paid into the RESP by the government.