All parents wish their children success and happiness in life. If you have young children of your own, you may have wondered what you can do to set your children up for success later in life. As it turns out, opening a ‘zero-dollar contribution’ Registered Education Savings Plan (RESP) and applying for the Canada Learning Bond (CLB) is one of the easiest ways to help your children out financially without dipping into your own budget.
So, where do we start? An RESP is a government-registered savings plan for your child that is used to finance education costs after high school. The CLB is money the Government contributes to low-income families, deposited into your child’s RESP - $500 to start, and then $100 every year until your child is 15.
When opening an RESP you have two options. You can choose to a zero-dollar contribution which means no monthly payment is required to open and access the Canada Learning Bond. Simply make an in-person appointment with your bank, and request to open a no-fee RESP and apply for the Canada Learning Bond. The other option is to open an RESP, apply for the CLB and then set your monthly contribution rate which can be as low as $10.00 per month.
If you choose to make a monthly contribution to your child's RESP, you will receive the Canada Education Savings Grant - where the Government will add 20% to 40% on to every dollar you contribute to your child’s RESP, depending on your family income. Doing this will not affect your child’s CLB funds, it is just another way to add more funds to your child’s RESP.
Before you get started, there are a few basic but important eligibility requirements you must meet before you apply for the RESP and CLB. Your children will be able to receive the CLB through their RESP if:
They were born in 2004 or later,
They have an RESP open in their name,
Both you and your children have valid documents, including a Social Insurance Number, a Birth Certificate, and a Permanent Resident Card (if not a Canadian citizen)
you can apply for a SIN number as your child is born and you have received the Birth Certificate.
You have filed your income taxes up to the last fiscal year,
Your family falls below the low-income threshold. For families with 1-3 children, this is a net income of $49,020 or less. For families with 4 or more children, the low-income formula can be found at https://www.canada.ca/en/employment-social-development/services/learning-bond/eligibility.html
If your family meets these criteria, your child is eligible to receive up to $2000 in their RESP account by the time they reach 18. If you didn’t sign your child up for an RESP and they are now between the ages of 14-20, do not worry. It is not too late. Open the RESP as indicated at the beginning of this blog and there is a chance that they may receive the CLB funds retroactively. Note: Each RESP opened at this age is reviewed on a case-by-case and accessing the full CLB funds is not guaranteed, but worth the effort.
Worried you don’t have great credit? Well, the good news is that opening a RESP and applying for the CLB does not require a credit check and can be done for free.
Attending post-secondary education comes with a few competing expenses, such as tuition, food, transportation and books. Fortunately, your children can use the money from their RESP towards all the costs of their education – this can be to a college, university, apprenticeship, or a trade/vocational/technical school, but if your children receive the CLB and choose not to attend post-secondary, all CLB funds will be returned to the Government.
If you need support through this process, we are here to help. You can receive an informational brochure on RESPs and the CLB from our offices, and you would like, one of our team members will be happy to virtually attend the initial meeting with your bank to support you through the process and answer any questions you may have.
Our children are our future. Their future begins with an RESP.