Registered education savings plan
College and university education is more important than ever before. Generally, two out of every three new jobs require some form of post-secondary education. One of the best ways to save for your children's education is to open a Registered Education Savings Plan (RESP).
Money that you contribute to the plan grows tax-free. However, you do not get a tax deduction from the contribution in the same way that you would from an RRSP.
As an incentive to help you save for your children's education, the government offers the Canada Education Savings Grant (CESG) – a grant of 20% on the first $2,500 contributed to an RESP each year for a total of $500. If you invest a minimum of $2,500 per year, you would get the lifetime maximum grant of $7,200 over 15 years.
The government enhanced the CESG to encourage lower-income families to save more. To accomplish this, the CESG provides an additional 10 to 20% depending on the family's net income.
In addition, the Canada Learning Bond (CLB) helps families of modest income save for children. Families who receive the National Child Benefit Supplement would qualify for the initial CLB grant of $500, and $100 for each year of eligibility until the child is 15 years old.
A beneficiary is eligible for the CESG up to the end of the calendar year in which they reach age 17, have a Social Insurance Number (SIN) and are a Canadian at the time of the RESP contribution.
The lifetime contribution limit is $50,000 per beneficiary. There are no annual contribution limits. You can make contributions each year for up to 21 years.
