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).
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.
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:
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:
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:
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:
Applying for the CESG is fairly straightforward.
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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.
Hannah Logan is a writer and blogger who specializes in personal finance and travel. You can follow her personal travel blog EatSleepBreatheTravel.com or find her on Instagram @hannahlogan21.