RESPs for Teenagers: The Gold Mine of Unused Grants

As parents, we sometimes feel like our kids grew up overnight! If you never got around to setting up that RESP for your child and now realize the probability of a post-secondary education is only a few years away, you may start to ask yourself if you still have time to open an RESP and save for school. The answer is YES; it's never too late! Not only can you still benefit from the RESP’s advantages, but you can also catch up on significant unused grant amounts for your child’s education!

Learning that we missed an opportunity simply because we didn’t have all the facts can be really disappointing. Unfortunately, this is the case for many parents in Quebec, who learn at a later date about the existence of the generous government grants offered to encourage education savings. Rest assured; even if you didn’t know, there’s still time to enjoy the benefits of the RESP!

Who’s eligible for the government grants? To benefit from the government grants, a registered education savings plan (RESP) must be opened for a child, and contributions must be made to the plan. You don’t have to be the beneficiary’s parent to set up an RESP: uncles, aunts, godparents, grandparents or even family friends can open a plan for a child dear to them.

As soon as children are born in Quebec, both levels of government provide for amounts that may be paid to their RESP’s under the following simple conditions:

• They must be Canadian residents;
• An RESP must be opened so the government can pay grants into it; and
• The grant application forms must be filled out.

And yet, the RESP remains a little-known investment vehicle; only 45.2% of the children in Quebec* eligible to receive government grants are RESP beneficiaries.

What grants are available in Quebec? The basic Canada Education Savings Grant (CESG) and Quebec Education Savings Incentive (QESI) respectively match 20% and 10%, of the first $2,500 annually contributed into the RESP. Everyone is entitled to the basic grants!

The additional CESG and QESI can respectively increase RESP savings by up to 20% and 10% on the first $500 contributed to a plan annually. These grants are calculated based on your adjusted family net income.

For more information about the government grants offered, visit our page dedicated to this topic on our website at universitas.ca.

The important thing to remember is that contributing $2,500 in an RESP every year means your child will receive the maximum grant amounts to which he or she is entitled.

Can I open an RESP for my teenager?

An RESP can be opened for children of all ages, but the biggest advantage of the RESP is the grant money offered for education savings. To be eligible for these grants, you must open an RESP for your child before the end of the calendar year of his or her 15^th birthday. As for the grants, these are paid until the end of the calendar year during which the beneficiary reaches the age of 17 years.

So don’t put it off any longer!

For more information on the options available to 16 and 17-year-olds, please refer to the Government of Canada website.

Is it possible to catch up on unused grant money from previous years?

YES, you can catch up on unused grant amounts from previous years! However, this is a gradual process; not all funds are available at once.

As previously explained, each year, both levels of government will pay grants on the first $2,500 contributed in the RESP. If unused grants from previous years are available, it’s possible to recover these, one year at a time.

All in all, it’s possible to contribute up to $5,000 annually in an RESP to receive grants for the year in progress as well as a past year’s worth of unused amounts. This course of action will allow you to maximize the grants for the current year, and to catch up on the grants from a previous one.

To explain this concept more clearly, let’s take the example of a father who opens an RESP for his 4-year-old son. He contributes $5,000 annually over the first 4 years he opens the plan. By doing so, he maximizes the grant amount for these 4 years and recovers the 4 years of grant money he missed before opening the RESP. This represents the hefty sum of $3,000 in maximized grants, plus another $3,000 in unused grants!

Now you have all the facts, take action and get the grants your child is entitled to. Better late than never! Contact a scholarship plan representative today to learn more!

________ * Source: 2014 CESP Annual Statistical Review http://www.esdc.gc.ca/en/reports/cslp_cesp/cesp_2014.page 1. The Canada Education Savings Grant (CESG) rate is 20% to 40% based on adjusted family net income. The maximum CESG limits are set by the federal government. The annual limit is set at $600 and the lifetime limit is set at $7,200 per beneficiary. The Quebec Education Savings Incentive (QESI) rate is 10% to 20% based on adjusted family net income. The maximum QESI limits are set by the Government of Quebec. The annual limit is set at $300 and the lifetime limit is set at $3,600 per beneficiary. Certain conditions apply; refer to the prospectus at universitas.ca.