As we approach the end of the year, there are a few things to keep in mind when it comes to your RESP. The Registered Education Savings Plan (RESP) is a government-sponsored savings plan that helps parents save for their children's post-secondary education. The RESP allows parents to save money in a tax-sheltered account and receive government grants to help grow their savings.

One of the main benefits of the RESP is that it offers tax-sheltered growth on investment earnings. This means that any money you make from investing your RESP savings will not be taxed. In addition to offering tax-deferred investment growth, RESPs have another benefit that can be leveraged. Through the Canada Education Savings Grant (CESG), RESP also offers government grants to help boost your savings.

However, the RESP has a few important rules to keep in mind, such as:

  • Maximum grant per year: The Canadian Education Savings Grant (CESG) is a government grant that adds 20% to your RESP savings, up to a maximum of $500 per year. Therefore, if you contributed $2,500 in a given year, you'll qualify for the full $500 in grant.
  • Carry-forward option: If you don't get the full grant amount each year, any unused grant room accumulates and carries forward until the year a child turns 17. You can go back one year at a time to make up for missed contributions; the accumulated carry forward cannot be utilized simultaneously.
  • Limits: The maximum lifetime grant is set at a limit of $7,200 per child and the maximum lifetime contribution limit of $50,000. This means that only $36,000 would qualify for the 20% CESG grant to reach the lifetime $7,200 grant limit.


What is the ideal RESP contribution strategy for maximizing CESG?

Now that we know the rules, the ideal RESP contribution strategy for maximizing CESG is one where you are making annual contributions of $2,500 starting the year your child is born. Parents who have delayed starting an RESP or haven't been able to contribute enough each year to receive the maximum grant amount might be able to use their carry-forward option to take advantage of that "free" government grant money. Hence the carry-forward option effectively allows you to double up on contributions to help you catch up on missed grant money.

However, even though the carry forward deadline is available until the child reaches 17, it can be very difficult to catch up on utilizing any unused grants. This is primarily due to the carry-forward rule noted above, which only allows one to go back one year at a time to make up for missed contributions. This means that the maximum grant available in a given year is $1,000, which is based on a $5,000 contribution.

If you begin catching up when your child is young, it may still be possible to play catch up. However, if you wait until your child is much older to start saving, you may never be able to receive the maximum annual grant of $500 per child or a lifetime grant amount of $7,200 per child. Let's look at two examples.

Example 1

You decide to wait until your child is nine years old to start an RESP. In this scenario, you can contribute $4,500 annually until the child turns 16 years old and still receive the full $7,200 of lifetime grant money within the eligible timeframe.

Example 2

You decide to open an RESP in the calendar year your child turns 12. In this situation, you could have six years to contribute and you can play catch up on your CESG by doubling up on the grant amount every year through the carry forward option. Thus, a contribution of $5,000 annually would allow you to receive $1,000 of grant money each year ($500 for the current year and $500 for unused room from a previous year). This would mean a total grant amount of $6,000, which is less than the lifetime grant of $7,200.


As you can see in "Example 2", the longer you wait to contribute to an RESP, the harder it’ll get to play ‘CESG catch up’ and in certain situations, you may be giving up free grant money. As a general rule, if you are starting later, but still want to get the maximum amount in CESG, you’ll have to start making RESP contributions no later than the time your child turns 10.

The Canada Education Savings Grant is a great way to save for your child's future education. By understanding the rules and contribution limits, you can ensure that you are making the most of your RESP and maximizing your benefits. Before December 31, take a few minutes to check your RESPs to make sure that you are on track to receiving the full CESG for the year. If not, consider making a catch-up contribution to ensure that you don't miss out on any free grant money.


The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting/tax professionals. NBG Chartered Professional Accountant Professional Corporation will not be held liable for any problems that arise from the usage of the information provided on this page.

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