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How to Maximize Your Child’s RESP with Government Education Grants — including the CLB, CESG and more

Are you struggling to deal with the rising cost of post-secondary education? You’re not alone. The good news is the government offers financial incentives towards saving for your children’s education. It’s important to contribute the right amount to your RESP to qualify for the maximum government education grants.

How Grants Bolster Your RESP

Unlike student loans, grants help bolster your RESP by providing funds that don’t need to be repaid unless you cancel the plan (when they will be returned to the government). Grant funds are typically given to students at the start or mid-school year. Applying for student grants, is relatively quick and easy – your eligibility is determined automatically when you apply for financial aid. In fact, you may find you’re eligible to receive more than one grant at the same time.

How Increases in These Grants Can Potentially Jumpstart Your Savings

The rising cost of post-secondary education is putting a strain on the finances of many families. Four years of post-secondary education tuition could cost $95,750 by 2025, according to Statistics Canada data. That could be as much as a mortgage for some families. Government education grants are a good way to jumpstart your savings, so students are less likely to incur a lot of debt upon graduation. However, it can be difficult to make RESP contributions when you have other financial responsibilities like a mortgage, car loans and retirement savings. Government education grants are essentially assistance from the government for helping to cope with this situation. By not taking advantage, you’re could be doing yourself a disservice.

You’d think parents would jump at the chance for government assistance, but in many cases you’d be wrong. Less than half of Canadian children 17 years old or under have received the Canada Education Savings Grant (CESG) since its introduction in 1988, according to the 2013 Canada Education Savings Program (CESP) Annual Statistical Review. It’s even worse for the Canada Learning Bond (CLB): only 30 percent of children eligible for the CLB actually receive the grant.

The lesson here is to take advantage of government education grants and start saving early. The sooner you receive government education grants, the more you can benefit from compound interest.

How a Heritage RESP Can Be Used to Maximize Grant Amounts

Heritage RESPs help you maximize your government education grants. When you have an RESP set up for your child, he or she may be eligible to receive government education grants paid into his or her RESP. This provides a financial incentive for parents to save towards their children’s education. Different government education grants have different contribution amounts to qualify for the maximum grant amounts. Here are the most common grants children may qualify for:

Canada Education Savings Grant (CESG): Receive 20 percent of your RESP contributions per year, up to a maximum of $2,500 per year and a lifetime maximum of $7,200.

Additional Canada Education Savings Grant (A-CESG): This grant is to assist low- and middle-income families. Eligibility is based on total net family income. Receive an extra 20 to 40 percent on the first $500 in RESP contributions per year, up to a maximum of $2,500 per year and a lifetime maximum of $7,200.

Canada Learning Bond (CLB): This grant is to help low-income families. Eligibility is based on total net family income. Receive an extra $500 in the first year and $100 in the following years, up to a lifetime maximum of $2,000.

If you qualify for government education grants, it’s important to apply sooner rather than later.

Check out the Heritage Education Funds website to learn more about the above referenced government education grants and any applicable provincial grants — available to British Columbia (BCTESG), Saskatchewan (SAGES), and Quebec (QESI) residents — and let them help you get started today.

Heritage Education Funds has created an easy-to-use tool for planning your RESP. Visit and try it out here!

 

Sources:

Financial Post

http://www.financialpost.com/m/wp/blog.html?b=business.financialpost.com/resp/theres-money-to-be-found-in-resp-grants

CanLearn.ca

http://www.canlearn.ca/eng/loans_grants/grants/index.shtml