The Canadian government has a few initiatives to assist families in saving for post-secondary studies. One such scheme is the Canada Education Savings Grant (CESG). The money from the CESG will be deposited straight into the RESP of the child. Employment and Social Development Canada (ESDC) offers a grant based on the amount donated to a child’s RESP to encourage parents, relatives, and friends to save for their child’s post-secondary education.
In this article, you will get a comprehensive understanding of CESG and how you can benefit from it. You can read more about CESG here: https://www.insuranceforchildren.ca/CESG-everything-to-know-about-a-canada-education-savings-grant/
Contents
What is the CESG?
The Canada Education Savings Grant (CESG) was introduced in 1998 when the federal government recognized the importance of education savings while improving the current RESP program.
It is important to note that CESG is not a loan but rather a grant. It’s a yearly government payment to an RESP of 20% of the contributor’s annual contribution or $500 per year, whichever is less. The grant is available to each child named as an RESP beneficiary. A lifetime payout of $7,200 is available to each beneficiary.
Money saved in a Registered Education Savings Plan (RESP) can be used to pay for the child’s post-secondary education, including:
- Part-time or Full-time studies in an apprenticeship program
- CEGEPs (general or vocational college in Quebec)
- Trade School
- University
- College
The CESG is refunded to the government if the beneficiary does not pursue post-secondary education.
What are the benefits of the CESG?
Given below are the top three benefits of the Canada Education Savings Grant :
- The benefactor can save for all of the beneficiaries within a single plan.
It’s easier to handle and track your investments when you don’t have a lot of programs to take care of.
What are the types of CESG?
The Canadian government has introduced CESG in two types: Basic CESG and Additional CESG.
Basic CESG
The Basic CESG is a tax credit that compensates you for making annual contributions to your RESP. The government will provide you with a grant equal to 20% of your contribution, up to $500 per year, whichever costs less to the government. To put it another way, if you put $1,000 into your RESP, the government will add $200 to it. Over the course of your RESP’s lifetime, you can earn a maximum grant of $7,200.
Additional CESG
The government goes far further for low-income households. Once you invest your first $500 each year, the government will deposit an additional $100 to your Basic CESG. Eligibility for Additional CESG is determined by your family’s earnings. If a contribution is not made in a particular year, the plan holder may make catch-up contributions in subsequent years.
What are the eligibility criteria for the basic CESG program?
The child must meet the following criteria to be eligible for the Basic CESG program:
- The applicant should be a Canadian citizen
- An authorized Social Security number is required
- In an RESP, they must be an identified beneficiary
- A parent or guardian must make a contribution to the child’s RESP before the end of the calendar year in which the youngster turns 15.
What are the eligibility criteria for the additional CESG program?
The annual income of the child’s caregiver determines the eligibility for the Additional CESG, which modifies each year.
The Additional CESG in 2021 could be:
- If the caregiver’s earnings are less than $49,021, then you can get 20% of the caregiver’s income x the first $500 donated to the RESP, up to $100.
- If the caregiver makes anywhere between $49,021 and $98,040, he or she may be eligible for a $50 bonus (10% of the caregiver’s income x the first $500 donated to the RESP).
Important things you should know for 16 and 17-year-old beneficiaries
Despite the fact that the Canada Education Savings Grant (CESG) is intended to begin at the age of 15, 16 and 17-year-old children can also receive CESG if one of the two conditions listed below is met.
- There is an annual contribution of $100 to an already established RESP in each of the four years preceding the child’s 15th birthday, and no money has been removed.
- Before December 31 of the calendar year in which the child turned 15, an RESP was established with a $2,000 payment, and no money was withdrawn.
This implies that to save for your child’s post-secondary education, you must begin saving in RESP before the calendar year in which your child turns 15 ends.
What is the procedure to apply for the CESG program?
Follow the steps mentioned below to apply for the Canada Education Savings Grant (CESG) program –
- Collect all of the relevant details, for instance, social security numbers of both you and your child.
- If you haven’t done so before, start a Registered Education Savings Plan (RESP) for your kid.
- Fill up the application form of CESG provided by the RESP supplier. You are accounted as the benefactor if you are an individual who is applying for the CESG.
- You must have the Annex B form signed to attach with the documents if you are neither the child’s primary caregiver nor the primary caregiver’s cohabiting spouse and/or partner.
- Allow for the deposit of your grant. The basic CESG amount and, if you qualify, the additional CESG amount will be added to your RESP account once you’ve been accepted. It will take approximately a period of one or two months once you make the beneficiation for CESG to reflect in your account.
Endnote
Canada Education Savings Grant (CESG) is a great initiative by the government of Canada. The options to save for a child’s post-secondary education have always been restricted. As a result, the Canadian government established these grants to encourage everyone to save a small sum each year for that worthwhile education, but with stringent requirements so that the saving is safe.