CGL Financial

Education Planning

Education Planning

The average cost for one year at a Canadian university, including living expenses, can be between $10,000 to $15,000 per year depending upon the university attended. Human Resources Development Canada have indicated that education costs may increase by 2.1% annually, meaning that a child born today could end up paying more than $85,000 for a four year undergraduate degree.

Without adequate savings there are a number of ways to finance your children's education, the most common are student loans, mortgage lines of credit and RRSP withdrawals.

While setting up a savings plan when your children are still young is the most effective way to ensure adequate funding, most parents are unaware of the many advantages a Registered Education Savings Plan (RESP) provides.

RESPs are registered with the federal government and allow money to be saved for a beneficiary's post-secondary education. Although there is no tax deduction for contributions made to an RESP, earnings grow tax-sheltered and contributions can be withdrawn tax-free.

Canada Education Savings Grant (CESG)

The Canada Education Savings Grant (CESG) is a special financial incentive for parents, family and friends to save for a child’s education after high school.

It provides people who invest in an RESP with a Basic CESG amount equal to 20% of yearly contributions, up to an annual maximum of $500 per eligible child, with a lifetime maximum of $7,200

However, depending on your family income, your child could receive additional funds in the form of additional CESG:

  • If your net family income is below $37,178†, the grant will be 40% for every dollar on the first $500 you save and 20% of the next $2,000 in your child’s RESP each year. That means you could receive up to $600 in CESG per year.
  • If your net family income is between $37,178† and $74,357†, the grant will be 30% for every dollar on the first $500 you save and 20% of the next $2,000 in your child’s RESP each year. That means you could receive up to $550 in CESG per year

 Please note, though, no matter which CESG formula you qualify for, the lifetime limit for each child remains at $7,200, as you can see from this chart:

Canada Education Savings Grant

Net Family Income $37,178* or less $37,178* to $74,357* Over $74,357*
Basic-CESG**
Additional-CESG on the first $500 40% = $200 30% = $150 20% = $100
$501 up to $2,500 annual RESP contribution 20% = $400 20% = $400 20% = $400
Maximum yearly CESG you may qualify for $600 $550 $500
Lifetime maximum CESG you may qualify for*** $7,200 $7,200 $7,200

To apply for the Canada Education Savings Grant:

  • Register the birth or adoption of the child.
  • Apply for a birth certificate
  • Apply for a Social Insurance Number (SIN) for the child. You can download the SIN application form here.
  • Open a Registered Education Savings Plan (RESP) with an RESP promoter, such as Heritage Education Funds.
  • Download the appropriate form for your CESG application

If you are a parent and/or legal guardian and will be contributing to your child's RESP, download form HRSDC-0073-E

If you are a grandparent, aunt, uncle or non-relative and will be contributing to a child's RESP, download form HRSDC-0071-E

Catching up on missed contributions

  • If you opened your RESP in 1998 or later and haven't collected any grant money yet, you are entitled to a maximum of $400 for each year you missed up to and including the year 2006. Effective January 1, 2007, the maximum entitlement increased to $500 per eligible child per year. These payments are not included in the calculation of your maximum annual contribution amounts.
  • If you can't make your RESP contributions for one or more years, you're still entitled to receive CESG payments for those years. For instance, if you stop making RESP contributions for two years and then start contributing again, you'll be eligible for an amount of CESG that would have been allocated for the years in which the payment was not made. This applies to Basic CESG only; Additional CESG is not carried forward.
  • Please note: for any contributions made before December 31, 2004, you must apply for the Basic CESG no later than December 31, 2007. Any contributions made from January 1, 2005, onward, you must apply for the Basic and/or Additional CESG within three years of the date you made the contributions.
  • CESG payments and interest will be paid to the student when he or she enrolls in the second academic level of an eligible post-secondary program.

Canada Learning Bond

The Canada Learning Bond (CLB) is a Government of Canada grant to help modest-income families start saving early for their child’s education after high school.

The Canada Learning Bond is put directly into an RESP in which the child is named as a beneficiary.

Eligibility for the CLB

You can get the Canada Learning Bond if:

  • Your child was born after December 31st, 2003; and
  • Your monthly Canada Child Tax Benefit payment (commonly known as “baby bonus” or “family allowance”) includes the National Child Benefit Supplement.*

* The supplement is generally for families with a net annual income below $37,178

The Amount of the CLB

For families who qualify, the Government will add to a child’s RESP by making a first payment of $500. Families that receive the Canada Learning Bond will also get extra payments of $100 a year up to the child's age of 15 years, as long as they receive the National Child Benefit Supplement.

An additional $25 will be paid with the first $500 bond to help cover the cost of opening an RESP.

Lifetime CLB Limit

The total CLB available for a child could amount to $2,000.

Using the CLB

As soon as a child named in an RESP is enrolled in a qualifying educational program, he or she can start receiving money. At that time, the CLB along with the CESG (if any) and income earned by the money in the RESP is paid to the beneficiary as Educational Assistance Payments (EAPs). Each EAP includes a specific amount of the CLB.

If the child named in an RESP does not continue education after high school, the CLB must be returned to the Government of Canada. The CLB cannot be used by another child.

Steps to Getting the CLB To get the CLB, all you need to do is to:

  • First apply for a Social Insurance Number (SIN) for your child. There is no fee to get one, however, certain documents are required. Contact 1 800 O-CANADA for more information or visit a Service Canada centre near you.
  • Apply to the Canada Revenue Agency for the Canada Child Tax Benefit.
  • Choose the RESP provider that best meets your needs. (RESP providers include most financial institutions, such as banks or credit unions, as well as group plan dealers or financial services providers.)
  • Open an RESP for a child.
  • Your RESP provider will apply for the CLB on your behalf.

The grant money will be deposited directly into the RESP.