Knowledge sure is expensive ? and getting pricier by the semester. These days, a university student living away from home can expect costs of up to $11,000 per academic year 1 and Statistics Canada expects tuition to continue to rise faster than the annual inflation rate 2 . But regardless of cost, a post-secondary education is still one of the best investments you?ll ever make on behalf of your children. In fact, Statistics Canada reports that the average university graduate earns almost twice as much as someone with a high school education.
Of course, the value of a post-secondary education goes far beyond monetary rewards ? you know that and it?s why you want your children to have all the advantages that come with a college or university education. Still, with all the expenses of daily life, it?s sometimes difficult to set aside money to fund your child?s post-secondary education. But even if you have been unable to save for their education until now, and even if your child is entering the teenage years, there?s still time to save ? but you must start now or you?ll miss out on a lot of ?free? government money. Here?s why?
To give a boost to your Registered Education Savings Plan (RESP) savings, the federal government introduced the Canada Education Savings Grant (CES Grant) 3 in 1998. The CES Grant matches your contributions at a Basic rate of 20%, usually on only the first $2,000 in contributions. Depending on your family?s net income, you may qualify for an Additional rate of 10% or 20% on the first $500 of contributions, which could result in an Additional CES Grant of $50 to $100.
Starting in 1998, every qualifying child under the age of 18 began to accumulate Basic CES Grant ?room? that is used to determine the maximum amount of Basic CES Grant that a plan can receive from the government in a year. Unused Basic CES Grant eligibility is automatically carried forward from year to year even if you did not have an RESP in place for your child during those years.
Whether you begin an RESP when your child is 6 years of age or 13, CES Grant is available for every year up to and including the year a beneficiary turns 17. (Special rules apply for children turning 16 or 17 in a year.) The maximum amount of CES Grant that can be received by a child born in 1998 or later is $7,200 and, if you?re playing catch-up, the maximum CES Grant paid by the federal government in any one year to an RESP is $800 (or $900 if your child qualified for the maximum Additional match rate in that year.)
Watch out for the ?hidden? RESP deadline
To qualify for CES Grant, you must take action before the year your child turns 16. Government rules stipulate that CES Grant will not be paid to a 16- or 17-year-old unless a minimum $2,000 RESP contribution was made by the child?s 15 th year, or a minimum annual contribution of $100 was made in any four years before the end of the child?s 15 th year. Miss the deadline and you?ll miss out on every cent of CES Grant.
A professional financial advisor can show you the optimum RESP strategies that ensure you take full advantage of the CES Grant and achieve maximum savings by the time your child heads off to school.
2 Statistics Canada, The Daily, September 2, 2004
3 CES Grant is funded by Human Resources and Skills Development Canada
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