We all want our children to have the best post-secondary education possible. However, we all know that this education can often be very expensive. The best way to plan for our children’s future is to start planning today. Even if you don’t have a lot of money to set aside, a few dollars each week can surprisingly add up quickly. Our Government is committed to helping all families save and prepare for post-secondary education through initiatives like the Canada Education Savings Grant, the Registered Education Savings Plan, and the Tax-Free Savings Account.
The Canada Education Savings Grant (CESG) is offered by the Government of Canada to help you start saving for your child’s education after high school. When you save in your child’s Registered Education Savings Plan (RESP), the Grant could add up to $200 on the first $500 you save annually, and up to $400 on the next $2,000. This money can be used for full-time or part-time studies in an apprenticeship program, trade school, CEGEP, college, or university.
Children up to the age of 17 years are eligible to receive the Canada Education Savings Grant, as long as they are Canadian residents and a RESP has been opened for them. It is also important to note that there are special rules that may apply if your child is between the ages of 15 and 17 years. For more information, please call 1-800-O-Canada (1-800-622-6232).
You can begin a Canada Education Savings Grant in two easy steps. The first step is to obtain a Social Insurance Number (SIN) for your child, even if your child is an infant. There is no fee to apply, but keep in mind that certain documents (i.e. a birth certificate) are required. The second step is to open a Registered Education Savings Plan (RESP) account. This can be done through a financial institution, such as a bank or credit union, or through a certified financial planner, or a group plan dealer. Once the RESP has been established, the Grant will be directly deposited into your child’s RESP. The money in the RESP will be invested, to allow it to grow and earn interest. You won’t be taxed on the interest and your child can usually withdraw the money tax-free. It’s also important to note that you should shop around to find a RESP provider that best suits your needs.
The advantage of the RESP is that no matter how little you save in the account, the Federal Government will still pay the Grant. Furthermore, your family and friends can also contribute money into your child’s RESP. The earlier you begin to save, the more your savings will grow for later! The savings can be substantial. For example, on the first $500 you save in your child’s RESP, the Canada Education Savings Grant will give you:
- up to $200, if your net family income is $37,178 or less;
- up to $150, if your net family income is between $37,178 and $74,357; and
- up to $100, if your net family income is more than $74,357.
For more information on both the Canada Education Savings Grant and the Registered Education Savings Plan, please feel free to call 1-800-O-Canada (1-800-622-6232), or visit a local Service Canada office, or visit www.canlearn.ca.
Our Government is also helping parents to save for the long-term by introducing the Tax-Free Savings Account in Budget 2008. This initiative is a flexible, registered, general-purpose account that parents may use towards their child’s education. Parents can contribute up to $5,000 every year to a registered Tax-Free Savings Account, plus carry forward any unused room to future years. The investment income, including capital gains, earned in the plan will be exempt from any tax, even when withdrawn. Parents and individuals can withdraw from the account at any time without restriction. Better yet, there are no restrictions on what parents and individuals can save for and the full amount of withdrawals may be re-contributed to their Tax-Free Savings Account in the future, to ensure no loss in a person’s total savings room.
Our Government is working hard to ensure every child in Canada is given the opportunity to succeed. We are doing this through initiatives like the Canada Education Savings Grant, the Registered Education Savings Plan, and the Tax-Free Savings Account. Each of these measures give parents the opportunity to begin to save today for tomorrow.