Parents living in Canada are able to invest in their children’s post-secondary education through the Registered Education Savings Plan, or heritage education funds RESP. This is not only an investment vehicle but is essentially a tax shelter as well. In addition to your own contributions, there are several government grants that you may be eligible for. The following grants, combined with the tax advantages, aim to provide your child with a solid source of income for future schooling.
1. Canada Education Savings Grant (CESG)
One of the most notable government grants is the Canada Education Savings Grant, or CESG, which aims to provide additional contributions to heritage RESPs. These contributions are dependent upon the family’s contributions and income level.
The maximum lifetime grant from the CESG is $7200 and contributions are made in a couple different ways. Grant payments are often 20% of the total annual contributions up to $2500 but may be a higher percentage for lower-income families. Another common payment strategy is 40% on the first $500 and 20% on anything over that amount.
2. Canada Learning Bond (CLB)
Unlike the CESG, the Canada Learning Bond, or CLB, is geared specifically toward low-income families and relies on the National Child Benefit (NCB) program to determine eligibility. Children must also be under the age of fifteen and born after 2003. Under the CLB, eligible families would receive $25 to cover the setup of their Registered Education Savings Plan and an initial $500 contribution into it. There is also a yearly $100 contribution for as long as families remain eligible.
3. Saskatchewan Advantage Grant for Education Savings (SAGES)
The Saskatchewan Advantage Grant for Education Savings, or SAGES, helps families residing in Saskatchewan and offers a lifetime maximum of $4500. The government will contribute 10% of the contributions made for that year into the heritage RESP but the maximum is $250 per year.
On January 1st of 2018, the Saskatchewan Advantage Grant for Education Savings was temporarily suspended. However, it’s still possible to complete a SAGES application for consideration, which will give you a head start if and when the grant is reinstated.
4. Québec Education Savings Incentive (QESI)
The Québec Education Savings Incentive took effect in 2007 and this is actually a tax measure that encourages families in Québec to start saving. As long as your RESP provider offers the QESI, you will be able to apply for and receive the incentive. Payments come in the form of a refundable tax credit, which is similar to the Saskatchewan deal.
Orchestrators of the QESI will contribute 10% of your annual contributions with a maximum of $250 per year per child. If you wish to apply for this tax credit, you will have to open an RESP with a provider that offers it and these are usually financial institutions, group plan
dealers, or financial services providers. It’s also the trustee of your RESP that will be the one applying for your QESI on your behalf.