The government of Canada has a couple of programs in place to help families save for the high cost of post-secondary education. One of these programs is the Canada Education Savings Grant (CESG).
What is the CESG?
The CESG is a program run by Employment and Social Development Canada that helps families save for a child’s post-secondary education. It’s an incentive-based program in which the government contributes to a child’s Registered Education Savings Plan (RESP) based on the amount that the family contributes.
How does the CESG work?
As mentioned above, the CESG is a grant that is awarded when contributions are made to a child’s RESP account. No matter your income, every Canadian child is eligible to receive at least the basic CESG, which is 20% of annual contributions made to all eligible RESPs.
That money can then help pay for the child’s education after high school. Studies can be full-time or part-time, and the money is valid for the cost of attending:
- Trade school
- Apprenticeship programs
- CEGEPs (general or vocational college in Quebec)
Note that the child must attend a recognized educational institution.
There are two types of CESG: Basic and Additional.
To be eligible for Basic CESG, the child must:
- Must be a resident of Canada
- Must have a valid Social Insurance Number
- Must be named as a beneficiary in an RESP
On top of that, parents, family members or friends must make contributions to that RESP before the child can receive CESG.
Eligibility for the Additional CESG is based on the adjusted income level of the child’s primary caregiver and changes every year. If
In 2021, the Additional CESG may be:
- Up to $100 if the caregiver’s income is less than $49,021 (20% of the caregiver’s income x the first $500 contributed to the RESP)
- Up to $50 if the caregiver earns between $49,021 and $98,040 (10% of the caregiver’s income x the first $500 contributed to the RESP)
The CESG is meant as a long-term saving strategy, so if you are just starting out when the child is 16 or 17 years old, you’ll need to meet two additional rules to qualify for the grant:
- A minimum of $2,000 must have been contributed to the child’s RESP before the end of the calendar year in which they turned 15. The money cannot have been withdrawn.
- A minimum $100 annual contribution was made to the RESP in any four years before the end of the calendar year in which the child turned 15. The money cannot have been withdrawn.
How to apply for the CESG
Applying for the CESG is fairly straightforward.
- Gather the necessary information, including the child’s SIN and your own.
- Open an RESP for the child (if you haven’t yet) and contribute to it.
- Complete the CESG application form, which you can get from your RESP provider. As the individual applying for the CESG, you are considered to be the subscriber. However, if you are not the child’s primary caregiver or are the cohabiting common-law partner or spouse of the primary caregiver, you will have to have the primary caregiver sign an Annex B form to include with the documents.
- Wait for your grant to be deposited. Once you’re approved, the CESG (and the Additional CESG, if you qualify) will be deposited into the RESP. Typically you’ll see the CESG about four to six weeks after making your contribution.
» MORE: How to set up direct deposit
How much can I receive?
The Basic CESG is 20% of the RESP contribution each year, up to a maximum of $500 per year. If you have room left over from previous years, it will be carried over. In this case, the maximum per year is $1,000.
If you qualify for the Additional CESG, an extra 10% to 20% will be added to the first $500, depending on the primary caregiver’s income.
The maximum lifetime amount of CESG, which includes basic and additional CESG, is $7,200 per beneficiary.
If the child does not use their RESP to pursue post-secondary education, the RESP may be closed or transferred into the parent’s Registered Retirement Savings Plan (RRSP). However, since the CESG is only for educational expenses, this money will be returned to the government.
CESG is paid after you make your contribution. So if you make one contribution each year, you’ll receive one CESG payment per year. If you make contributions on a different schedule, such as monthly or on the beneficiary’s birthday, your CESG payments will reflect that timing. Check with your RESP about any conditions related to contribution timing.
Yes, when you withdraw RESP contributions, including CESG money, you’ll be taxed on that income. However, since the beneficiary is a student, they are likely not earning much other income and therefore will pay little or no tax on this money.
An RRSP is a retirement account that you or your common-law partner or spouse can contribute to and receive huge tax benefits. Start saving early to plan for a happy retirement.
The tax-free withdrawals of a TFSA offer more flexibility, but the tax-deferred contributions of an RRSP are great for retirement. The type of account you choose will depend on your savings goals.
This government grant provides qualifying Canadian families up to $2,000 in a Registered Education Savings Plan (RESP) to help fund their child’s education.