You may already know that contributing to a Registered Education Savings Plan (RESP) for your child is a great investment in their future, but are you getting the maximum benefits available to you? Not only does an RESP provide tax-deferred growth, by maximizing your annual payments, your child could also receive up to an additional $7,200 over the lifetime of the plan. Through the Canada Education Savings Grant (CESG), the first $2,500 contributed annually to each plan automatically earns 20% to a maximum of $500 per year. Some families can also qualify for the Additional CESG, which can help them accumulate the CESG faster.
The deadline for making contributions that are eligible for the CESG is December 31 each year, so there is still time this year to get the maximum benefit possible. If you miss the deadline you could miss out on the grant unless you have carry-forward room as described below, so it’s important to make sure you’ve made your maximum contributions before the end of the year.
Here are some quick tips on how you can ensure you are receiving the maximum grant benefits possible for your children’s RESPs.
The CESG does have some flexibility that allows you to carry forward grant room, so there is an opportunity to catch up if you started the RESP when your child was older or you weren’t able to contribute the maximum amount in previous years. However, the sooner you can take full advantage of the CESG, the more time that grant money can earn income.
Have a written plan
By creating and sticking to a budget, this can help you see were to maximize savings and how much you can afford to set aside in your child’s RESP for the maximum benefit possible. A written plan allows you to keep track of discretionary and non-discretionary spending, so you can make better-informed decisions that can help you meet your financial goals.
Take advantage of the increased Canada Child Benefit
In July 2019, the Canadian government increased the Canada Child Benefit (CCB) by 3%, which could mean an extra few hundred dollars a year per child available for savings. Families that aren’t making the maximum contributions to their children’s RESPs could consider putting some of the CCB toward monthly or annual contributions to increase the their CESG benefits. Even adding just $25 per month can have a big impact on compound growth and benefits.
Ask for RESP contributions instead of gifts
Birthdays and other celebrations can see our kids inundated with toys and clothes they may not need or even use. As many as 77% of Knowledge First Financial customers put the onus on themselves alone to make RESP contributions. However, some family and friends may welcome the chance to help contribute to an RESP instead of giving gifts. This could help boost your annual contributions, making it easier to meet your savings goals.