Canada Education Savings Program (CESP) Basics


Canada Education Savings Program

Graduation © by James Almond

The cost of college continues to rise — even in Canada. If you want to be able to help your child pay for a post-secondary education, you can do so with help from the Canada Education Savings Program (CESP). The CESP is meant to encourage parents to contribute money in savings so that their children can pay for college. Relatives and friends can also become involved.

The CESP incentives work in conjunction with a Registered Education Savings Plan (RESP), which comes with tax advantages for those who open one for the benefit of a child’s education. When you take advantage of these programs, you are preparing for a better financial future for your child.

CESP Options

There are two main options for making use of incentives to save for your child’s college education. These options are:

  1. Canada Education Savings Grant (CESG): This grant comes from Canadian government and depends on your contributions. A payment of 20% on RESP contributions you make is added to the account.  Up to $7,200 can be deposited directly into the RESP for your child, helping you boost the contents of the RESP.
  2. Canada Learning Bond (CLB): Children born after December 31, 2003 are eligible for the CLB if an RESP has already been opened for them. Your qualifying child can receive up to $500 right now to help pay for college, and $100 each year until your child is 15. The total available is up to $2,000 (if you open when your child is born, you get $500 + $100 for the yearly amount). The money goes into the RESP. Unlike the CESG, however, you don’t have to put money into the RESP to qualify for the CLB.

The money that you receive from the CESP can be used later on for study at a university, college, trade school, CEGEP, or apprenticeship program. The money is available for part-time studies as well as for full-time studies. This means that the money put in for your child’s education is fairly versatile in use. Just make sure you understand the requirements for withdrawing the money, and how the process works when your child begins his or her post-secondary studies.

Start Early and Save More for Your Child’s Education

It’s a good idea to start as early as possible when saving for college. Indeed, if you want to maximize the money you can receive from the Canadian government for school, it’s best to start as soon as your child is born and receive the benefit of the CLB for as many years as possible. You can also maximize your RESP contributions by making sure your child is signed up for the CESG. These are incentives that come automatically once your child’s RESP is registered, so it is an automatic savings tool.

College planning requires foresight and consistency. Create a plan to contribute a regular amount to an open RESP for your child, and make sure he or she is signed up to receive the incentives offered under the CESP. You’ll rely less on student loans, and your child will start out with a brighter, less encumbered future.

10 comments to Canada Education Savings Program (CESP) Basics

  • Marianne

    I’ve just made the appointment with our financial advisor to set up our son’s RESP. Thanks for explaining some of this- I’ve found it all to be a bit confusing and some things I’ve read have even seemed to contradict each other. I recently blogged about how we’ve been able to save a bunch of money up for our RESP here: http://preservingpennies.com/?p=42

  • Geoff

    It seems the cost of education is going up everywhere. The CESP is a great idea to encourage parents to save for their child’s education.

  • Julie @ Freedom 48

    We’ll definitely be setting up RESP’s as soon as we have children. Why not take advantage of the 20% gov’t contribution and maximize the years for investment growth. I’m sure by the time our kids to go university it’ll cost an arm and a leg… so we’ll do whatever we can to help our kids out (however, our retirement is our #1 priority!)

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