Use the Canada Child Benefit to boost an RESP

Use the Canada Child Benefit to boost an RESP

Even a small contribution could yield you free money


With the beefed up Canada Child Benefit cheques being mailed out this week, it’s an opportune time for families to consider investing some of that extra money in RESPs for their kids. As MoneySense columnist and personal finance expert Bruce Sellery wrote this week, a new Ipsos poll found that parents plan to spend 37% of the benefit on day-to-day expenses, and 22% on savings for post-secondary education. This is great news, especially because the maximum Canada Child Benefit will go to families with incomes under $36,520.

The Government of Canada provides a 20% grant to all eligible Canadians regardless of family income. To maximize the basic Canada Education Savings Grant (CESG), you would have to put $2,500 into your child’s RESP annually. However, there are some lower and middle class Canadians who are eligible for additional grants but don’t know it. These additional RESP grants apply to the first $500 of contributions each year, unlike the normal RESP grants, which are payable on the first $2,500 of contributions per year.

That means low and middle-income families can receive an additional CESG grant of up to $100 per child annually if they fall below certain income thresholds. For instance, a family of four with a net income of $45,282 or less would get a $100 grant on the first $500 contributed to an RESP for their child annually. If the family’s net income is between $45,282 and $90,563, the additional grant would be $50 annually per child. (This is all on top of the regular 20% CESG grant available to all eligible Canadians.)

“The launch of this program is a great reminder for all of us parents to open up RESP and then get creative to increase income or cut expenses to make the contribution and give our kids a leg up later in life,” says Sellery.

Even though money is tight for low and middle income families, this week’s increased Canada Child Benefit could make RESPs a little easier for families to fund. According to our Canada Child Benefit calculator, a family of four earning $40,000 net annually will receive a CCB in 2016 of $11,450—an increase of $3,416 over last year’s CCTB and UCCB combined payment of $8,034. That means an extra $285 per month. Just a $50-a-month RESP contribution for each child would make them eligible to receive an extra $100 each in additional CESG grant money this year.

So families should look at their budgets and consider using the extra funds from the CCB to contribute a little more to their child’s RESP. In the long term, anything that helps them minimize debt during their post-secondary years will be much appreciated.

Use our handy calculator to determine how much Canada Child Benefit you can expect to receive this year.

—A previous version of this article incorrectly stated that the Alberta Centennial Education Savings (ACES) plan was still available to Canadians. The grant was discontinued in 2015. MoneySense regrets the error—