The basics

Tax-free growth: The money you contribute into an RESP (Registered Education Savings Plan) grows tax-free until withdrawn.

Contribution limit: You can contribute up to a maximum of $50,000 per beneficiary for the duration of the RESP.

CESG maximum: CESG (Canada Education Savings Grant) payments have a lifetime maximum of $7,200.

Household income and CESG payments

Regardless of income, all families get a grant of 20% on the first $2,500 they put in the RESP. ($1,000 in CESG if there is unused grant room from a previous year.) There is a $7,200 maximum per beneficiary over the life of the RESP.

If your annual net family income is between $40,970 and $81,941: the federal government will add up to $50 (an extra 10% on the first $500). There is a maximum of $7,200 over the life of the RESP. These family income amounts are updated each year based on the rate of inflation.

If your annual net family income is less than $40,970: the federal government will add up to $100 (an extra 20% on the first $500). There is a maximum of $7,200 over the life of the RESP. These family income amounts are updated each year based on the rate of inflation.

Assumptions

You contribute early in the year: You make your contribution at the beginning of the calendar year to gain a year’s worth of extra growth.

CESG payment comes later: The CESG payment is made to the child’s RESP account 120 days after your RESP contribution (to account for time needed by RESP and CESG administrators to coordinate the transfer).

Interest on the CESG payment starts after that: Interest is calculated for the CESG amount beginning on the 121st day of the calendar year.

Estimated investment rate of return: The default growth rate of the money invested inside the RESP is conservatively estimated at 6% per year. Adjust this figure up or down to see how a change in the estimated investment rate of return affects the long-term growth of your education nest egg.

Years to save: The child begins her post-secondary education at age 18.