What if saving for your child's education was easier than ever before?
You may already know about RESPs. However, the CESG is a type of government grant that can really help you top up your child's education savings plan. Unfortunately, many Canadians don't know what CESG is and why it is so beneficial.
This is a program intended to supplement contributions you make to your child's education via the RESP. But it is still a completely different program with its own eligibility criteria and application requirements. Fortunately, we're here to walk you through everything you need to know about this program and how you can start saving for your child's education as early as today.
Keep reading to learn more about CESG, including who is eligible and how you can apply!
What Is the Canada Education Savings Grant (CESG)?
Our guide is going to tell you everything you need to know about the CESG. But let's start with the big question: what is it, exactly?
CESG stands for the Canada Education Savings Grant. It is a special program run by Employment and Social Development Canada, and the goal of this program is to help families save up for their child's post-secondary education.
The CESG interacts with the Registered Education Savings Plan. Specifically, the government will make contributions to a family's RESP based on how much that family has already contributed.
How Does CESG Work?
Now you know about what the CESG is. Let's take a closer look at exactly how this plan works for Canadian families.
When families make contributions to a child's RESP, the government makes a corresponding CESG contribution. This contribution is usually 20% of what the family has put into the RESP. In other words, the more you put into the RESP, the more you can get from the CESG.
The CESG funds can then be used for any post-secondary educational costs. This includes paying for universities, colleges, trade schools, apprenticeships, and CEGEPs.
There are no income requirements or restrictions on receiving Canada Education Savings Grant funds. The only "catch" is that the funds only pay out if a child is attending an officially recognized educational institution.
It's worth noting that this Savings Grant is only really a supplemental program. While it provides a great financial benefit to families struggling to save for their child's education, such families should most definitely have other savings plans in place to help their children complete a post-secondary education.
CESG Eligibility Requirements
There are certain eligibility requirements for the Canada Education Savings Grant. In fact, there are two sets of requirements: one for basic CESG and one for additional CESG.
To qualify for basic CESG, there are only three core requirements. This includes the child being a Canadian resident, having a Social Insurance Number, and being the beneficiary of a family's RESP. After that, the government will begin making grant contributions as the family makes RESP contributions.
The easy eligibility for this program is one of the absolute best things about the CESG. We recommend enrolling right away: there is effectively no downside to doing so, and the quicker you sign up, the quicker you can begin receiving much-needed financial benefits.
CESG Additional Eligibility Requirements
It is possible to receive additional CESG based on family income. If the child's caregiver has an income that is less than $49,021, the child can receive up to an additional $100 CESG. And if the caregiver has an income between $49,021 and $98,040, the child can receive an additional $50.
Generally speaking, the RESP and CESG work best when you begin saving early. If you begin the plan when a child is 16 or 17, there are two more criteria to qualify for Canada Education Savings Grant benefits.
First, the family must have put at least $2,000 towards the RESP before the calendar year that their child turns 15, and the family must not have withdrawn these funds. Second, the family must have made a minimum $100 RESP contribution in at least one of the four years leading up to the calendar year their child turns 15. This funding, too, must not have been previously withdrawn.
The additional funds available to certain Canada Education Savings Grant subscribers can make a big difference when it comes to saving up for a child's education. Just don't forget that you may need to provide proof of your current income level in order to receive additional funds. This is one more reason why it's so important to gather and organize your paperwork before you apply to this particular program.
Applying for the CESG
Interested in receiving Canada Education Savings Grant benefits? Fortunately, applying is very easy and it's something you can get started today!
First, you'll need to gather the paperwork with your child's important information. This includes the Social Insurance Numbers for both your child and yourself. As we noted above, you may also need to have relevant information that proves your income level to access additional benefits; if you know you don't qualify, though, no proof of income may be necessary.
Second, you'll need to set up an RESP for your child before you can access CESG benefits. But if you have already created an RESP, you can skip this step. It's worth establishing an RESP as soon as possible because you can make contributions whenever you want, and you can receive the additional CESG support for each contribution that you make.
Third, you need to contact your RESP provider to get the CESG application form. On this paperwork, you will be considered the "subscriber." But keep in mind that there will be additional paperwork if you are not the child's primary caregiver. Specifically, you will need to have the primary caregiver fill out and sign an Annex B form that you will eventually submit with the rest of your paperwork.
The fourth and final step is to wait for your application to be approved. Once it is approved, you should receive basic and (if you qualified for it) additional CESG benefits. This process typically takes between four and six weeks after you make your own contributions, so keep an eye out for that deposit.
By the way, now is the perfect time to begin brushing up on your financial literacy as you make plans to save for your child's education.
How Much Money Can I Expect to Receive?
The Canada Education Savings Grant is a great way to put away funding for your child's education. But you probably have a simple question at this point: just how much money can you expect to receive from this program?
As we noted earlier, this grant typically provides 20% of your RESP contributions. There is a cap on this, though: the CESG usually pays out no more than $500 each year. Though if you have funds remaining from a previous year, it can pay out a maximum of $1000 instead.
Those who qualified for additional grant benefits may receive an additional 10%-20% added to the initial $500. This is contingent on the primary caregiver's income.
Keep in mind that this program does have a maximum amount. Whether or not a child qualifies for additional benefits, the lifetime maximum amount per child is $7,200.
It is worth noting here that the average cost of university tuition for Canadian residents is $17,000 per year. Some institutions may be much more expensive, with the University of Ontario tuition coming in at $27,000.
These are annual fees, meaning that the average Canadian resident can expect to pay around $68,000 for a four-year degree. And that is not counting the potential other costs, which range from the cost of staying in a dorm or apartment to the cost of textbooks and food.
That means that the lifetime maximum of $7,200 for the CESG will ultimately be only a drop in the bucket for the average college student. When it comes to saving up for college, it is very important for you to focus more of your attention on the RESP and other savings plans. But with the CESG, you effectively get "extra" for doing what you would be doing anyway: saving for your child's tuition.
When Will the CESG Be Deposited?
Canada Education Savings Grant benefits are effectively reactive. In other words, you won't see these benefits until a few weeks after you make an RESP contribution.
As we noted before, CESG deposits usually come in between four to six weeks after you make an RESP deposit. If it takes longer, or if you are worried about the status of that contribution, you should speak with your RESP provider.
It may go without saying, but due to the potential delay between RESP deposit and CESG payment, we recommend that you make your deposits as soon as possible. Otherwise, either you or your child may be stuck waiting for the funds to come in at key times, especially when it comes to financial deadlines related to the college of their choice.
What If My Child Doesn’t Pursue Post-Secondary Education?
The entire point of the CESG is to help families save for a child's post-secondary education expenses. That brings us to one final question: what if the child doesn't pursue such an education?
In that case, your best bet is to transfer the money into the primary caregiver's Registered Retirement Savings Plan. Otherwise, it's possible to simply close the account, but that money will now go to the Canadian government instead of being given to you as a refund.
If your child is having second thoughts about pursuing post-secondary education, it may be worth reviewing what their different options are. For example, many children may not think this education is right for them because they are wary of going to a traditional college or university. But such a child may thrive in something like a vocational program (and the degree and practical skills from such a program may ultimately provide more opportunities to the child than a traditional degree would provide.
While potentially getting a little extra money for your own retirement may sound useful, keep in mind that both the RESP and the CESG are designed to help save up for a child's education. Instead of wasting the money that you have helped to save up, and the extra money provided by the CESG, we recommend you speak with your children about alternative educational opportunities so they can make the most of these funds.
Final Thoughts on the CESG
Ultimately, the CESG is one of the best ways to help save money for your child's future education. But these benefits are tied to your RESP contributions. If you want to be able to contribute more and make the most out of these programs, you need to find other ways to save money.
Unfortunately, it is very difficult for the average family to save enough for their child's education because so many other costs are increasing. For example, you have probably noticed the premiums creeping up on your different insurance plans. And every extra dollar you spend on things like insurance costs is a dollar that you aren't able to spend on your child's education.
The answer is simple: to save more for your child's education, you need to find ways to get more affordable insurance coverage. To start saving on health insurance, life insurance, travel insurance and more, come get a quote today!