would garner a $500 CESG payment, typically at the end of the month following the month of the contribution. Imagine that: it’s essentially a 20% guaranteed return on your investment!
A key question that comes up with respect to RESPs is: what happens if you don’t open the plan and make the contributions right away? Maybe this is the first you’ve heard of the plan. Or perhaps your child is two years old and those early years have been incredibly busy. Is that CESG lost? The answer is no. You are entitled to $7200 initial grants over the lifetime of the plan. If your child was born in 2015 and you didn’t open the plan until 2017, you could contribute $5000 now and apply half of that money to the previous year. The federal government would give you $1000. You would do the same in 2018 and collect the same grant. However, you can only go back and recoup the grant one year previous one year at a time. Grants will still be paid until your child reaches 17 years. Funds are then used to support any post-secondary education they wish to pursue; the grant is not limited to university or college.
Here’s what I call the ‘X’ factor: most people are so excited to receive the ‘free’ money that they forget to invest it! Generally speaking, anything you can invest in a TFSA or RSP is also eligible for an RESP.
Why not invest those funds into something that going to grow over time? If you start early, your child will have 17 years of investment growth and government grants. The plan has a few limitations: first, the afore-mentioned $7200 of grant contri-bution; second,the plan has a limit of $50,000 in total contributions; and finally, the plan has a maximum lifespan of 35 years. If you’ve maxed out your RESP there are alternatives: contact me and we can discuss!
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