RESP vs Canada Education Savings Grant: Which One Is the Best?

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The Canada Education Savings Grant (CESG) is a Government of Canada education program, that is administered through the Human Resources and Skills Development Canada. The primary role of this program is to assist Canadian children to get higher education at an affordable cost. Under this program, the government of Canada contributes a certain amount to a Registered Education Savings Plan by heritage education funds based on the demand and the income level of each family making the contributions.

The government of Canada pays about 20% of the required annual contributions which add up to about $2,500 per child. On the other hand, low-income earners may be granted up to 40% from the first $500. The maximum grant that the program offers is $7,200 per child. Most parents open a Registered Education Savings Plan in order for them to provide their children with the ability to achieve their lifetime dreams of a better education and future. Apart from this, parents may prefer these grants because they can grow their income on a tax-deferred process, something that allows them to save for their children’s future, as well as manage their financial goals.

Since its inception in 1998, an estimated 47.1% of Canadian-based children under the age of 18 have benefited from this program. The government of Canada on its part has injected an estimated $8.1 billion to support a total of up to 4.84 million students.

The Registered Education Savings Plan (RESP), is an investment platform available to parents with school going children in Canada. Having an RESP grant enables parents and their children to receive untaxed education grants which are paid into the beneficiary’s heritage education funds RESP account.

Just like the CESG, RESP central role is to provide an opportunity for parents to save for their children’s education. The main advantage of RESP is the simplified access they provide the Canada Education Savings Grant in generating tax-deferred income.

RESP is a tax-oriented program designed to benefit only post-secondary students. With an heritage RESP program, contributions are already taxed based on the contributor’s tax rate. On the other hand, CESG is mainly taxed upon withdrawal by the beneficiary.

Since RESP is a post-secondary program, the beneficiaries generally pay little to no federal tax owing to tuition and education tax credits. With this in mind, the student can have a peace of mind since they have an excellent source of income to fund their post-secondary education. Once a student has completed high school and graduated, they may use the grant to support their post-secondary education, regardless of whether it is on a part-time or full-time basis. The student can either choose an apprenticeship program, or a trade school.

The Canadian government promotes education by providing these grants to parents as incentives towards their children education. Additionally, some provinces may offer supplemental grants as an extra layer of providing an incentive towards the post-education learning process of a child. However, for a parent to collect the maximum amount of grants offered by the government, they must know how much they need to contribute to RESP. This information is mainly obtained from RESP branches and government institutions mandated with providing the grants.

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