How RESP Matching Works
December 14, 2020
How much do you really know about the Registered Education Savings Plan, or RESP—one of the most powerful and tax-friendly ways for Canadians to save for post-secondary education? Have you considered the government grants your child may be eligible for? Contributing to an RESP is a great way to give your child the financial means to pursue any type of post-secondary education, whether a vocational, college, or university program, in Canada or abroad.
Yes, there is a lot of information to digest around qualification and how it all works, but the advantages are considerable. Just as a starter, contributions grow tax-free if they're in the plan and payments to college students get taxed at the student's rate, rather than at the parents’ rate. But the main perk of the RESP is that, unlike other types of savings accounts, it provides access to generous government grants that match your contributions. Every child is entitled to grants, and children from lower- and middle-income families can benefit from additional grants. No matter what your current financial situation is, the RESP can help you and your family get a leg up on post-secondary education costs.
If you’re a resident of Quebec, your beneficiary may be eligible for three matching grants:
- Canada Education Savings Grant (CESG): Available to any Canadian resident with a Social Insurance Number (SIN)
- Canada Learning Bond (CLB): For low- and middle-income Canadian residents
- Quebec Education Savings Incentive (QESI): Exclusively for residents of Quebec.
When you add it all up, it makes a big difference. Quebec residents who open an RESP could receive up to $12,800 in matching government grants1 for their beneficiary.
Let’s break this down and take a more detailed look at each grant.
1. Canada Education Savings Grant (CESG)
The first great thing about the RESP is that all Canadian children are entitled to the Canada Education Savings Grant (CESG). This means they automatically qualify for a lifetime cumulative amount of up to $7,200 in CESG.
The Canadian government matches your RESP contributions: for each dollar you contribute, the government pays 20 cents—up to the annual limit of $500. To get the maximum CESG amount, you should contribute $2,500 per year.
Here’s some more good news, especially if you already have enough financial admin in your life! When you open an account with Kaleido, you don’t have to apply for the CESG separately. We apply for it—as well as for all other grants2—on your behalf and the matching grant money is deposited directly into your RESP.
Low- and middle-income families may be eligible for the additional CESG. The Canadian government will match another 10% to 20% of your contributions, depending on your family income, for the first $500 contributed each year.
2. Canada Learning Bond (CLB)
The Canadian government also offers another matching grant for lower-income families: the Canada Learning Bond (CLB). If your child qualifies for the CLB, the government will contribute $500 in the first year of eligibility and an additional $100 each year of eligibility, until your beneficiary turns 15 years old. The CLB is subject to a lifetime limit of $2,000 per beneficiary.
CLB money doesn’t really match contributions: if your family qualifies, your child will receive the CLB even if you make no RESP contributions3.
Is My Beneficiary Eligible for the CLB?
To receive the CLB, your child must meet all of these eligibility criteria:
- Born in 2004 or later
- Comes from a low-income family
- Has a Social Insurance Number (SIN)
- Resides in Canada
- Is the beneficiary of an RESP account.
Children in care who are eligible for the Children’s Special Allowances program will automatically qualify for the CLB.
3. Quebec Education Savings Incentive (QESI)
Quebec, Alberta and Saskatchewan also have their own matching provincial grants. In Quebec, the Quebec Education Savings Incentive (QESI) is a refundable tax credit, paid directly into your qualifying RESP. The QESI matches 10% of your RESP contributions, up to a maximum of $250 per year. To maximize your annual QESI amount, you should contribute $2,500 during the year.
The lifetime limit in QESI is $3,600.
Is My Beneficiary Eligible for the QESI?
- Is the beneficiary of an RESP
- Is 17 years of age or younger (special conditions apply if the child is 16 or 17 as of the end of the year)
- Is a Quebec resident as of the end of the day on December 31st of the taxation year
- Has a Social Insurance Number (SIN).
In Quebec, low- and middle-income families may qualify to receive the additional QESI of up to $50 per year, in addition to the basic QESI amount.
Unused Grant Room
Not every year brings the same opportunity to save or invest. If for any reason you’re unable to contribute $2,500 a certain year, you can contribute more in the following years to recover grant entitlements, since CESG and QESI grant room is carried forward each year.
Still Not Sure How It Works? Here’s a Couple of Examples
In 2020, you open an RESP for your daughter to save money for post-secondary education and you contribute the maximum annual amount of $2,500 into the account. However, you don’t make any contributions in 2021 and 2022.
You would get at least $250 in QESI into your RESP for the first year, but you wouldn’t receive anything for the next two years, since there is nothing to match.
In 2023, you exceed the annual limit and contribute $3,000. No worries, you would still be able to claim up to $250 per year in accumulated grant room for those years in which you didn’t make contributions. The QESI amount paid for the year 2023 would be of $300.
For Peace of Mind, Open an RESP Today
Hopefully, you now know more about the RESP and the generous government grants you could receive for your child. The sooner you open an RESP, the longer your contributions can grow tax-free, and the more matching grants you may receive. Get peace of mind knowing your child will have the means to pursue any type of post-secondary education when the time comes. To open an RESP or for any further questions, contact us today.
1. Canada Education Savings Grant (CESG) from 20% to 40%. Quebec Education Savings Incentive (QESI) from 10% to 20%. Based on adjusted family net income. The annual limit is set at $600 for the CESG and at $300 for the QESI. The lifetime limit per beneficiary is set at $7,200 for the CESG and at $3,600 for the QESI. The Canada Learning Bond (CLB) is up to $2,000 per beneficiary and is offered for children born after December 31, 2003, from families who meet the financial criteria. Certain conditions apply; see our prospectus.
2. Contingent on the receipt of the required grant application authorization. Certain conditions apply; see our prospectus.
3. Certain conditions apply; see our prospectus.