The Canadian government encourages parents to utilize RESPs to save for their children’s post-secondary education (PSE), including full- or part-time study at a trade institute, college, university, or apprenticeship program. In addition, the Canadian government offers several initiatives to assist families in saving for the massive expense of post-secondary education. The Canada Education Savings Grant (CESG) is one of these initiatives. To know more about CSEG, visit https://www.insuranceforchildren.ca/cesg-everything-to-know-about-a-canada-education-savings-grant/ for more informtion.
An overview of the Canada Education Savings Grant
The Canada Education Savings Grant (CESG) is a government-funded contribution sent directly to a beneficiary’s Registered Education Savings Plan (RESP). An eligible beneficiary must contribute at least $2,500 per year to an RESP to be eligible for this benefit.
The CESG is a financial aid program to encourage parents to save for their children’s education. CESG is paid based on RESP contributions. Savings from a Registered Education Savings Plan (RESP) can be utilized toward the cost of full or part-time study at a CEGEP, vocational school, or university.
For the CESG, you must contribute to an RESP. Anyone can open an RESP, even if they aren’t the child’s parent.
There is a maximum of $500 per year in matching funds from the CESG, which means that yearly contributions of $2,500 are eligible for matching. If a contribution is not made in a specific year, the plan holder may make catch-up contributions in subsequent years.
Contributions to a CESG are accepted until the child reaches the age of 17. Additionally, depending on the primary caregiver’s income, a child may qualify for an additional 10 to 20 percent match into their Registered Education Savings Plan (RESP) from the Canadian Education Savings Plan.
Here are a few things you should know about the CSEG:
- What is the taxation structure of the CESG?
The RESP funds can be used for full-time or part-time post-secondary study. This includes CEGEPs and college/university programs. The CESG money is refunded to the government if a child does not continue post-secondary education.
Additionally, it’s worth noting that this amount is also not tax-free. The CESG will be taxed when it is withdrawn. However, because a student would withdraw the money, it is likely that no tax will be payable or that the total payment will be very minimal.
2. Eligibility for the Canadian Education Savings Fund
There are two kinds of CESG based on income. However, your income hardly plays a role when it comes to RESP eligibility. Thus, the CESG is available to everyone.
A youngster must fulfill three criteria to get CESG.
- They must be a resident of Canada.
- They must possess a valid social insurance number (SIN)
- They must be the beneficiary of an RESP.
Since CESG is for long-term savings, some additional rules exist for youths aged 16-17 years. This age group must meet two criteria to be eligible for the grant.
- A minimum amount of $2,000 must be deposited to (and not taken from) the RESP before the child reaches 15.
- A $100 annual payment must have been made (and not withdrawn) in the previous four years.
3. Applying for the CESG
For the CESG, the process of applying is pretty simple.
- Gather the relevant information, such as the child’s and your own Social Insurance Numbers (SINs).
- If you haven’t already, open and fund an RESP for your child.
- Fill out the CESG registration form through your RESP provider. If you are not the child’s natural guardian or the principal caregiver’s cohabiting common-law partner, you should have the legal guardian sign an Annex B form.
- Await the deposit of your grant. Once approved, the CESG (and, if applicable, the Additional CESG) will be put into the RESP. The CESG usually arrives four to six weeks following your contribution.
4. How frequently do you get CESG?
After you contribute to your child’s RESP, CESG conducts an audit of the account. Consequently, you will get one CESG payment for that year’s payments if you contribute yearly.
Those who contribute to RESPs monthly or quarterly also get CESG contributions. However, you should examine your RESP’s terms regarding contribution timing. Your family’s financial situation determines how much money you can invest.
5. What will happen if the child does not attend college?
If the child does not use the RESP contribution made on their account, the contributor may withdraw the funds or transfer them to other investments or retirement funds plans. However, the unused portion of the CESG is transferred to the government to benefit another student in need.
Since the CESG is aimed to reduce the parent’s financial burden associated with college fees, CESG can also be transferred to a new beneficiary, but only if you meet certain criteria.
- If a caregiver contributes to their child’s RESP before the end of the year in which the child turns 15, they will be considered for the grant.
- The child should be a permanent resident of Canada.
- A valid Social Insurance Number is required.
- Must have a Registered Education Savings Plan (RESP) in the child’s name.
- The government must file a request for matching contributions.
6. Are you required to repay CESG?
No. The Canadian Education Savings Program is not a loan but rather a gift from the government of Canada to its young people. It’s a strategy to motivate them to pursue careers and further their overall mental development.
As a grant recipient, you are not obliged to pay the money back after finding employment. This distinguishes CESG from government-sponsored education finance.
Education is vital, but it is not cheap, and it appears to be getting more expensive by the day. Saving money for your children has never been easier in Canada. The government launched these grants to encourage individuals to save a small amount each year.
Investing in all aspects of your child’s or grandchild’s future as a parent relieves the stress of security on their planned path and allows you to enjoy the present.