Helping you save for your child’s education after high school
November 16, 2021
By the Minister of Employment, Workforce Development and Disability Inclusion, Carla Qualtrough
When the Covid-19 pandemic hit in March 2020, our lives were turned upside down. I can say it was overwhelming at times trying to juggle the needs of my own children and family with my professional career and the worry I have felt for the well-being of all Canadians.
Today, I am feeling more hopeful. As vaccination rates rise, I look forward to the day when we can carry on with our lives without the stress and uncertainty of the pandemic weighing on our shoulders.
At the same time, I realize that not all Canadians have experienced the pandemic equally. Some have lost their jobs and businesses; others have lost their support system, their health, or even a loved one. For some Canadians, the path to a bright future may look challenging.
The Government of Canada recognizes the difficulties that many Canadians have faced – and in some cases continue to face. This is why economic recovery is at the forefront of our agenda. Since the onset of the pandemic we have taken action to provide a wide range of targeted supports for those in need, and are continuing to do so. Helping those who have struggled the most will benefit all of us in the long run.
As a parent, I often worry about the impact of the pandemic on our children. Many Canadian students are facing challenges – but I want them to feel optimistic and hopeful about the future, and I want to help create a clear path to their goals and the future they desire. Part of that is placing money aside for their education after high school.
For many Canadians, the prospect of saving for a child’s education might feel like a big commitment at a time like this. However, as we work to put the pandemic behind us, it is important that we keep looking toward the future.
As our children go out looking for their first jobs after graduation, they will likely require some form of training, whether it be trade school, an apprenticeship, college, university, or CEGEP. That is why saving for education is so important. Post-secondary education is the foundation that good careers are built upon and it is where our children get so many of the skills they need to succeed in life. Luckily, there are government programs in place to help parents and guardians prepare financially for a child’s future.
With that in mind, here are five things you should know about education savings.
1) Start early
The earlier you start, the more time you will have to grow savings for a child. Putting aside just a small amount every month can add up quickly. Plus, when you open a Registered Education Savings Plan (RESP), the Government of Canada matches part of your contributions.
Over time, the money in an RESP, including the Government’s contributions, generates interest that will grow your savings faster. For example, if you have $1,000 in an RESP for 10 years, assuming average earnings of 5% per year, your investment would be worth over $1,600 by the time your child is ready to attend post-secondary.
Saving for your child’s education could also affect your child’s outlook on their future. Evidence suggests that future education savings can have a motivating effect, and that students are more likely to seek post-secondary learning opportunities.
2) Take advantage of government incentives
Regardless of your financial situation, the government can help you prepare for your child’s future. Due to financial constraints, many families may not be in a position to save for their child’s education after high school. This is especially true during the pandemic. That is why the Government of Canada offers various education savings incentives such as the Canada Learning Bond (CLB) and the Canada Education Savings Grant (CESG).
The CLB provides up to $2,000 toward an RESP for an eligible child until the age of 15, and you do not need to contribute any money of your own to receive it. Eligibility for the CLB is based on family income.
In addition, when you place money in a child’s RESP, the government will match 20% on the first $2,500 of your annual contribution through the CESG and depending on family income, you could receive an additional 10% or 20% for the first $500 contributed each year. The amount you receive will depend on family income and the amount contributed. The CESG is available until the calendar year in which the child turns 17, for a maximum lifetime amount of $7,200.
How to apply
To receive the CESG and the CLB, you will first need to open an RESP. This is easy to do:
Step 1 – Get a Social Insurance Number (SIN) for yourself and your child. It is free.
Visit www.canada.ca/social-insurance-number for more information or visit a Service Canada Centre near you.
Step 2 – Find an RESP promoter that offers the CESG and the CLB.
Some RESP promoters may ask you to pay for their services, or put conditions on RESPs. Ask the right questions and get the facts to help find the right RESP promoter for you.
- Do they offer the CESG and the CLB?
- What types of RESPs do they offer?
- What are the advantages and risks of each option?
- Are there administration fees and penalties?
Step 3 – Open an RESP and apply for the CESG and the CLB. The RESP promoter can help you do it.
3) Anyone can open an RESP
It may surprise you to learn that anyone can open an RESP for a child—a parent, guardian, grandparent, relative, or even a friend.
You just need the child’s SIN to open the account and register it to the child.
4) It’s never too late to start saving
While it’s true that getting an early start on education savings will make saving easier, it’s also never too late to get started.
When you open an RESP, you can receive the CESG and CLB retroactively. So, when opening an RESP for an older child or teenager, be sure to ask your RESP promoter about how you can receive the incentives from previous years.
Even if you are a student entering post-secondary with no education savings, it’s not too late. If you were born in 2004 or later and your parents never applied to receive the CLB when you were a child, you can easily apply to receive it yourself when you turn 18. You have up until the day before you turn 21 to apply. To get started, you will need to find an RESP promoter that offers the CLB. The promoter can help you open an RESP and apply for it.
Due to the Covid-19 pandemic, post-secondary students may find themselves in need of additional financial support. That is why, under the new Canada Student Financial Assistance Program, the Government of Canada has doubled Canada Student Grant amounts until July 2023. As a full-time post-secondary student, you may be eligible to receive up to $6,000 in Canada Student Grants. That’s money you don’t have to pay back. Additional amounts are also available if you have a disability or dependents.
Financial supports are also available for you if you choose to get certified in the skilled trades. Skilled trades jobs pay well and are in demand across the country. CSG and CESG funds can be used to pay for apprenticeship training at trades training institutions. In addition, the Government of Canada offers grants to support apprentices during their training:
- Apprenticeship Incentive Grant: a taxable cash grant of $1,000 per year or level for registered apprentices, for a maximum of $2,000 per person
- Apprenticeship Incentive Grant for Women: a taxable cash grant of $3,000 per year or level up to a maximum amount of $6,000 per person
- Apprenticeship Completion Grant: a taxable cash grant of $2,000 per person for registered apprentices who complete their training and obtain journeyperson certification.
5) Education is a lifelong pursuit
When we talk about education savings, we often think of preparing for our child’s future. However, in today’s ever-evolving labour market, many adults will go back to school at some point in their lives, whether it be to upgrade their skills or change career paths altogether. The prospect of returning to school can seem financially daunting. Luckily, there are supports in place to help you afford the costs of education should you decide to return.
- Under the Lifelong Learning Plan, you can withdraw up to $10,000 in a calendar year from your Registered Retirement Savings Plan (RRSPs) to finance full-time training or education for you, your spouse or common-law partner.
- If you are returning to school after at least 10 years in the workforce, you may be eligible to receive the Skills Boost top up, which provides an additional $1,600 in Canada Student Grants.
- If you are returning to school after losing your job, you may be eligible to receive Employment Insurance benefits while studying full-time at an approved institution.
Education Savings Week is a good reminder that it is never too early or too late to start planning for the future. Our government wants to make sure that all Canadians have access to the tools they need to succeed. Getting a higher education is one part of the journey to success.
Learn more about education savings and the benefits of saving for tomorrow, starting today.
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