How to get an A+ in saving for your child's education
Saving for your child’s education may not be at the top of mind when they are young, but when put to the test, starting to plan early will get you and your child at the top of your [financial] class.
Crowe MacKay’s trusted advisors review what a Registered Education Savings Plan (RESP) is, who is eligible, and how to best plan so you get the most out of your savings.
*In this article a subscriber is referred to as the individual(s) who set-up the RESP
To be eligible for an RESP the following requirements must be met:
*When an RESP is set-up as a family plan it allows for multiple beneficiaries to be named as long as all designated beneficiaries are connected by blood relationship or adoption to each living subscriber.
*Qualified promoters consist of financial and investment institutions who will then provide the subscriber with all the required information to setting up the plan.
The Canada Education Savings Grant (CESG) is a federal program where funds are given to eligible RESP accounts based on contributions and the net income of the subscriber(s).
The CESG is granted on the first $2,500 in annual contributions to the RESP. Grants are issued to eligible beneficiaries on an annual basis on or before December 31 of the year the beneficiary turns 17. Contributions must be made before the end of the calendar year in which your child turns 15 years of age in order for your child to receive the CESG.
An RESP may receive up to a maximum of $600 in grants per year based on the subscriber(s) net income, with a lifetime maximum of $7,200.
The family net income thresholds are adjusted annually and the following chart reflects the income threshold for 2020:
Net income of $48,535 or less | Net income over $48,535 but less than $97,069 | Net income over $97,069 | |
CESG on first $500 of annual RESP contributions | 20% = $100 | 10% = 50$ | Beneficiary is not eligible |
CESG on first $2,500 of annual RESP contributions | 20% = $500 | 20% = $500 | 20% = $500 |
Max annual CESG contribution | $600 | $550 | $500 |
Lifetime max CESG | $7,200 | $7,200 | $7,200 |
The following are ways in how the RESP contributions can be disbursed:
*if eligibility conditions are met
There are several formulas to calculate the taxable and non-taxable portion of payments as they are made.
This article has been published for general information. You should always contact your trusted advisor for specific guidance pertaining to your individual needs. This publication is not a substitute for obtaining personalized advice.
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