RESP Contribution And Grant Rules For 2014

by Mike Holman

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One of the main benefits of RESP accounts is the federal Canadian Educational Savings Grant (CESG). This grant is 20% of any eligible contributions in an RESP account.

How the RESP grant system works

Let’s say you open an RESP account for your bouncing new baby and contribute $1,000 into the account. Your financial institution will send the account and contribution information to the Canadian government for grant approval. If the grant is approved, the institution receives the grant money and deposits it into your account.

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The math

20% of the $1,000 contribution is $200, so you will now have an extra $200 in the account courtesy of the Canadian government. This basically gives you an extra 20% one-time return on your contribution.

Basic RESP contribution rules and numbers to know

  • $2,500 – Amount of annual grant-eligible contribution room accrued each year starting in 2007 or the year the child was born (whichever is later). The contribution room continues accruing up to and including the year when the child turns 17 years old. This amount is based on the calendar year and not the birth date.
  • $2,000 – Amount of annual grant-eligible contribution room accrued each year starting from the year the child was born or 1998 (whichever is later) up to and including 2006.
  • 20% – Amount of grant earned on an eligible contribution. For example: a $1,000 contribution would earn a grant of $200, if that contribution is eligible for a grant. There are additional grants available for lower income families.
  • $500 – Maximum amount of grant a beneficiary is eligible to receive for each calendar year from the year they were born or 1998 (whichever is later) to the year they turn 17 years old. This amount was only $400 for years prior to 2007.  A calendar year is from January 1st to December 31st.
  • $7,200 – Lifetime grant limit per beneficiary. If you contribute $2,500 every year, you will hit the maximum grant level in the fifteenth year, and no more grants will be paid to the beneficiary. This limit includes additional grants available to lower income families.
  • $50,000 – Lifetime contribution limit per beneficiary. Because there is no annual limit, you could potentially make one single contribution of $50,000 to an RESP if you choose.
  • Contribution room carry over. One of the great things about the RESP is that you can carry over unused contribution room into future years. However, there is a catch: Only one previous year’s worth of contributions can be used each year.
  • Contributions are not tax-deductible.  You won’t get a tax slip, and you can’t deduct RESP contributions from your taxable income.

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For example: If you start an account for your six-year-old child, you can contribute $2,500 (this year’s contribution room) plus another $2,500 (from previously unused contribution room) for a total of $5,000, to receive a grant of $1,000. You are allowed to contribute more than $5,000 in this scenario, but there will be no grant paid on the amount above $5,000. When calculating contribution room carryover from past years, don’t forget that the contribution limit was only $2,000 prior to 2007.

RESP contribution examples

Let’s do some examples to clarify exactly how this works.

Example 1 – Simplest example

Steve was born in 2010. His parents are broke, but one kindly grandmother decides to open an RESP account for him.

She opened the account in 2010 and has $2,500 of contribution room available. She contributes $1,500 to the account in 2010, so the RESP grant is $300 (20% of $1,500).

In 2011, she contributes $1,200, thereby qualifying for a $240 grant.

Example 2 – A more complicated example

Little Johnny was born in 2006. His parents decide in 2010 to set up an RESP account for him. They want to know how much money they can contribute each year to catch up on all the missed government grants.

Let’s add up the current contribution room.

2006 – $2,000 of contribution room

2007 – $2,500 (new rules)

2008 – $2,500

2009 – $2,500

2010 – $2,500

In 2010, the couple has $2,500 of contribution room for the current year plus $9,500 of contribution room from previous years.

Since the rule is that you can only contribute up to $2,500 of previously carried over contribution room each year in addition to the current contribution room, this means they can contribute this year’s amount ($2,500) and another $2,500 for a total of $5,000, which gives a grant of 20% or $1,000 for 2010. Since they only used $2,500 of their available $9,500 of carried over contribution room, they now have $7,000 in contribution room to carry over for the future.

  • In 2011, they can contribute another $5,000 for a $1,000 grant. $4,500 of contribution room is carried forward to the next year.
  • In 2012, they can contribute another $5,000 for a $1,000 grant. $2,000 of contribution room is carried forward to the next year.
  • In 2013, they can contribute only $4,500. $2,500 from the current year plus $2,000 they carried over from the past.
  • In 2014 and beyond, they can only contribute $2,500 each year and expect to receive the full grant of $500.

Summary of contributions they can make to get all the government grants:

  • 2010 – Contribute $5,000, receive $1,000 grant, $7,000 of unused contribution room
  • 2011 – Contribute $5,000, receive $1,000 grant, $4,500 of unused contribution room
  • 2012 – Contribute $5,000, receive $1,000 grant, $2,000 of unused contribution room
  • 2013 – Contribute $4,500, receive $900 grant, $0 of unused contribution room
  • 2014 and onward – Contribute $2,500, receive $500 grant

Please note there are special RESP contribution rules for 15, 16 and 17-year-olds.

RESP family plan contribution allocations

If you have a family plan with two or more beneficiaries, you need to allocate each contribution between the beneficiaries. For example, you might want to set up all contributions to be divided equally between the account beneficiaries. Or you might have a particular contribution that should be allocated to just one beneficiary. You must set the allocation so the government can track the grants for each child.

When you open an RESP account or add a new beneficiary to an existing account, you can set up the default allocation to split the contributions equally among the children on the account. If you want to make a contribution with a different allocation, you have to indicate this on the purchase order.

More detailed RESP information

Check out the RESP rules page for a list of more detailed RESP articles on this site.

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Want to learn more about RESPs? Buy The Book:

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The RESP Book: The Simple Guide to Registered Education Savings Plans

Everything you need to know about RESPs.

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{ 174 comments… read them below or add one }

1 TheFinancialBlogger

Great explanation. The strength of our government lies within their social program. However, their weakness lies within the rules around them!

Would you suggest to have one plan per child or a big plan for the whole family?

2 FourPillars

Thanks FB.

I’ll be looking at the individual account/family account issue in the series. In your case I’d say the family account is probably better because the account fees will be less with one account (although you probably don’t pay any fees) and it’s a bit easier to share the money between beneficiaries.

In practical terms there aren’t a lot of differences between individual and family accounts for the average family.

Mike

3 MillionDollarJourney

FP, do you know the diff between the indiv. plans and the family plans? Is just that with family plans, the money can go towards “any” of your children?

4 FourPillars

FT – there are a number of differences which I will cover. I believe it is easier to “share” the money in a family account however if your older child doesn’t go to school then you can name a younger sibling as the beneficiary of their individual account which works out to the same thing.

Mike

5 FourPillars

I should also clarify that you can do transfers between individual accounts and you can also transfer individual accounts into a family account whever you want (up to age 21).

There’s enough flexibility with the rules that I don’t think the decision between individual vs family account is a significant one.

Mike

6 Julien

This is a great series. there is a lot of unanswered questions about RESP plans and few online resources. Looks like your series will clear things up, looking forward to reading your other posts.

7 Four Pillars

Thanks Julien, unfortunately I don’t think it’s possible to clear up everything to do with RESPs since I think they are still writing some of the rules…

I’ll do my best however.

Mike

8 amanda medley

So…My daughter was forn in 1999. We started an RRSP for her at $50/month but now we want to raise it to 200/month. That 200/month would be 2400/year, which would give us a grant of 480, right? But, in theory, we could also put in another $100 to make up for the shortfall this year and $1400 for last year (2007) (total 1500 extra) and all that extra money would get the full 20% grant? So… should I borrow money on my line of credit at 6% to do this? And then make up previous years (2006) next year (2009) by doing $200/month as well for 2009 and then putting in an additional $1400 (for 2005) to get maximum grant potential? I’m just thnking that it’d be better to borrow now and get a full grant than to borrow when it’s time to get her to university…

9 amanda medley

Sorry, I meant she was “born” in 1999 and we started an “RESP” not “RRSP” – typing faster than I can think.

10 Four Pillars

Hi Amanda – yes, you are correct that you can make up the contributions from previous years – your math adds up.

I can’t really advise you to borrow or not for this purpose although I don’t really see the point of it. If your daughter was only a couple of years from needing the money and you absolutely had to use the contribution room this year or lose it, then maybe borrowing might make sense.

It’s hard to say without more information.

11 Joanne

My husband will be receiving a lump sum retirement incentive. We have been advised to put the money into his RRSP to avoid paying higher taxation on it. Would we be able to deposit a portion in our daughter’s RESP instead and get the same tax break?

12 Four Pillars

Hi Joanne – no, the RESP does not produce any kind of tax break like the RRSP.

Mike

13 Aref

Greetings,
I do suggest that you create a tool to calculate the maximum eligible contribution for this year and the carry forward amounts to help parents plan their finances ahead of time.

Thank
Aref

14 Four Pillars

Thanks for the suggestions Aref. That tool would be pretty simple so maybe I can put a spreadsheet together for people to use.

Mike

15 Romeo

Hello Mike,
Is there any posibility to catch up with any grant money from the unused eligible contribution after the kid turns 18? E.g. If you contribute $2,500 after the year when the beneficiary turns 18 but before 21 and claim grant money $500 of unused contribution from the previous years when no contributions were made and no grant received.
Thank you
Romeo

16 Four Pillars

Hi Romeo – no there isn’t. The last year a child can get a grant is the year they turn 17.

Mike

17 Yuda

If I over-contributed this year, may I contribute less than $2500 next year to receive the same amount of grant of (total) $1000 for two years?

Thank you in advance to answer my question.

Yuda

18 Four Pillars

Hi Yuda – no it doesn’t work that way.

You might look into seeing if you can get the extra contributions cancelled – there might be a gov’t form for this like there is for rrsp.

19 Barbara

Your website is a fabulous source of information, thanks.
My question, my oldest son is turning 17 on Nov 2/08, we have been contributing to an RESP through the Canadian Scholarship Plan since his birth, and then later started to contribute also through an account at RBC, investing in GICs. How do we know if we have overcontributed and also if we have received all the grant money we are entitled to?
Is there a site somewhere that tracks this information, or is it up to us to pull out statements to figure this out.
Thanks

20 Four Pillars

Hi Barb – thanks for the compliment!

The HRSDC keeps track of all the contributions and grants so you should give them a call first.

Mike

21 Reaganliu

Thanks for the examples. I have about 12K non-used grant-eligibal contribution accumulated from previous years, but I can only use $5000 maximium this year and get 1ooo grant. If I make another 5K or 10K contribution this year, i wont get grant which is understood, but does the non-used grant-eligibal amount will be carried over to next year ? thanx

22 Four Pillars

Reaganliu – all of the unused grant-eligible amount will get carried over to the next year.

However, you can only use one year’s worth of “unused grant-eligible amount” per year on top of the normal $2500 amount.

So you can use your $12k but only $2500 per year at a time.

23 Reaganliu

thanx Four Pillars. I am thinking to move the stupid mutual funds to kids RESP for a long term investment. Anyway, so bad so far, it is going down everyday.

24 BB

Excellent info – thanks for taking the time.

OK – here’s one.

I have 50k to invest all at once since the market is in the can. My little one is 12 years from attending college.

does the government catch up to me with their portion of the deal annually until their maximum is met?

25 Four Pillars

BB – that’s an easy one.

No!

You will get the grant for two years worth of contribution ($1000 of grant on $5000 of contribution). That’s it.

26 Jodie Gagnon

We moved back to Canada on July 1, 2008 – is the eligable contribution amount for CESGs reduced/prorated for the time we were in Canada or do we get 100% for 2008?

27 Four Pillars

Jodie – I have no idea.

I would call the HRSDC and ask – please let me know what the answer is:

1-800-622-6232

28 Helen

I’ve read that there is a limit on withdrawals by the student of $2500 per 13 week session. That’s only $7500 per year! University costs way more than that. Plus I now run the risk of having excess monies in the account after they finish 4 years. How can they do everything to encourage me to save and then not let my child use it? I hope I’ve read it wrong.

29 Four Pillars

Hi Helen, couple of corrections:

1) There is a limit of $5,000 of EAP money in the first 13 weeks of school. This does not apply after the first term.

2) This limit only applies to non-contributions (ie interest, capital gains, grants). You can take out your contributions as you please.

This limit really shouldn’t affect anyone.

30 Sonny

Hi guys,
I’m new to all this about investments and RESP… but I was planning to open an account with Questrade and save for my newborn education via ETFs.
I’d like to ask for your comments for the following allocation:

20% XIU – Canadian Large Cap 60 Index Fund
15% XDV – Canadian Dividend Index
15% XSB – Canadian Short Bond Index Fund
25% XSP – US S&P 500 Index
25% XIN – MSCI EAFE Index Fund

Am I putting at risk the future of the baby??

Thanks in advance for letting me know your thoughts.

31 Four Pillars

Hi Sonny, first of all I’m not a financial advisor so take everything I say with a grain of salt.

1) I think the future of the baby will be fine regardless of how the portfolio does.
2) This asset allocation is 85% equities which is very volatile. I would strongly suggest that you start adding to the bond portion in a few years. In my resp account I have 100% equities but I will start switching to bonds when they are around 8 or 9 years old.
3) I haven’t looked at the holdings of XIU and XDV (might make a good post) but I suspect there is a lot of overlap between the two. If that is the case then I would suggest for simplicity that you just pick one or the other and make that 35% of the portfolio.

Other than the overlap I like it!

Mike

32 Audrey

My two grandchildren are age 21 and 18. Both are now through high school. The 21 year old is taking University courses but it is unlikely that the 18 year old will take any further education. Can I roll his contributions into his sister’s plan without losing any of the grants, etc.?

33 Daliss

I have a family RESP and in 2005, when my eldest was 18 (i.e., no longer eligible for a grant), I contributed $4000 with the intent of paying the maximum contribution ($2000) for the youngest for the 2005 year, as well as $2000 for the youngest for a previous year. I did the same in 2006 and 2007. I just realized (duh!) that SD-RESP account divided the contribution between my two children, so that instead of getting an $800 grant, I only got $400. Is that normal? Is there any way to change this retroactively. For this year’s contribution, is there any way I can ensure that it is directed all to the youngest and none to the eldest? (My youngest is in his 17th year, so this is the last year he is eligible for RESP grants?

34 Four Pillars

Hi Daliss – most RESP providers allow you to choose the percentage allocation for each contribution (ie 50% for each child). You can change this anytime. As for doing this retroactively – I don’t see why not – you should ask the provider to do this. If they say they can’t then call the government (HRSDC) and find out the rules.
Yes, the child in his 17th year can receive grants this year only.

35 KathyM

Question? We just started an RESP account for my child, born in 1993. She turned 15 in 2008. So far monthly contributions (for 2008) total $1,800.00. Does this mean we “have” to contribute another $200.00 before the end of the year in order to qualify for the gov’t grant? And recently I have read contribution amt’s have gone up to $2,500.00 Does this mean I have to contribute an additional $700.00 to qualify. Pls clarify , much appreciated.

36 Four Pillars

Hi Kathy – there is no minimum amount of contribution in order to get a grant. You can put $50 in this year and still get a $10 grant.

However – you are in a special situation where if you want to get grants for your child for the years where they turn 16 and 17 (ie 2009 and 2010) then you need to put a minimum of $2000 in this year for that to happen.

Note: This rule only applies to someone who is setting up an resp for their 15 year old where there have been no prior resp contributions.

This is the exact rule and link:

http://www.hrsdc.gc.ca/en/learning/education_savings/publicsection/CESP/CESG_FAQs.shtml#Q3


3. What if the child is 16 or 17 years old?
The Canada Education Savings Grant Program has been designed to encourage long term savings for post-secondary education. There are special rules for children in the years they become age 16 or 17 years old. RESPs for beneficiaries 16 and 17 years old will be eligible only if at least one of the following two conditions is met:

a minimum of $2,000 of contributions has been made to, and not withdrawn from, RESPs in respect of the beneficiary before the year in which the beneficiary attains 16 years old; or
a minimum of $100 in annual contributions has been made to, and not withdrawn from, RESPs in respect of the beneficiary in at least any four years before the year in which the beneficiary attains 16 years old.
This means that you must start to save in RESPs for your child before the end of the calendar year in which they turn 15 years old in order to be eligible for the grant.

Note: For more details, call toll-free at 1 800 O-Canada (1-800-622-6232).

37 ali

ok. i get the concepts, but my math is atrocious. My stepson was born in 1995 and has had no RESP contributed from either parent. I want to set him up a plan now…..where do i go from here? Is it still worth it?

38 Four Pillars

Ali – you could contribute up to $5,000 per year for the next 5 years. I would say that it is probably worth it in terms of grants.

Make sure you read this post though – http://www.moneysmartsblog.com/2009/04/15/resp-contributions-and-a-reader-question/

39 Paul

Hi Mike,
I have the first of 3 starting College this year and need to start withdrawing from their group RESP. What if any, are the restrictions on how the investment can be used? Tuition, rent and books I take it are a given. What about transportation, food and student fees? How stringent are the rules for using the funds. Are receipts required at the banking institution to use or withdraw the funds?

40 Four Pillars

Hi Paul, you just have to provide some sort of proof of enrollment and then you can start withdrawing the money anytime you like – you don’t need to have a specific “reason” for any withdrawal.

This could vary with the resp provider but there is no CRA (government) regulation about tying the withdrawals to specific needs or having to show receipts.

You should check with your resp provider to see what they require for proof of enrollment.

41 Hitz

I am here to seek advise from you.
I am really confused with RESP ,I have been shopping around last few days.
Spoken to Heritage funds RESP,Children Education Funds RESP, and TD bank.
I am not able to decide which one should I go for .
Are Banks good or these non profit organizations.
My kid is only 10 months , want to do it before she turns 1year.
I would appreciate as much advise i can get.
Cheers
Hitz

42 Mike

Stay away from the group resps – they are not “non profit” – far from it.

Banks are fine although watch for fees. TD efund is the best one as long as you are just getting the normal cesg payment.

http://www.moneysmartsblog.com/2007/11/23/resp-how-to-get-started/

43 KRB

My wife and I have 3 kids. We have our oldest in a group RESP right now with CST, and the others with nothing so far (a toddler and infant). Would it be better to start a self-directed RESP thru the bank for the other two, or add them to the group plan, making that a family fund? Are there any drawbacks (now or down the road) to either?

As for using up a prior years unused contribution room, how do you go about electing a certain year (i.e. are there any forms to fill out to designate a year)? Is it always the calendar year, and does it go from when the plan was started, or is it just based on the childs age? I guess what Im asking is will I be able to make up the grant room for my other two kids if I havent started up a plan for them to date? We dont even have a SIN card for one child yet. Thanks in advance!

44 Mike

Hi KRB – I’m not a fan of group resps because of their high fees and restrictive rules so personally I would stay away from them.

Self-directed is the way to go. The family account is ok for convenience but it doesn’t really make that much difference.

The contribution room is always calculated according to the birthdate so you don’t elect a year – you just make the contribution and make sure you don’t go over any limits.

45 Edward

The ad with the teaser GOC cheque at the top of the 2009 RESP page is repulsive. Otherwise, am enjoying your site (saw the touts in the weekend G&M).

46 Brian Wilms

Just a short question. Does the party that makes the RESP contribution on behalf of the child get a tax rebate for the tax year they make the contribution?
Cheers,
Brian

47 Mike

Brian – no tax rebate for RESP contributions.

48 namsilat

Does anybody know if there’s a way to find out the current total RESP contribution made to date on a particular beneficiary?

49 al

my daughter is at a university in the us. we bought her a laptop. can this be claimed through resp?

50 Mike

namsilat – the HRSDC keeps track of all contributions/withdrawals.

Al – yes.

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