Lower-income Canadian families using an RESP also have the option of maximizing their return through the Canada Learning Bond, or CLB. The CLB can provide up to $2,000 worth of easy money to fund your child’s education!
If you’re a parent in Canada, you should be contributing to your child’s RESP in an effort to provide post-secondary education should they need it. Take it from someone currently drowning in student loan debt: your kids will thank you!
What is the Registered Education Savings Plan (RESP)?
Your child must have a RESP in their name before they can benefit from government grants like the Canada Learning Bond or the Canadian Education Savings Grant (CESG).
An RESP is a tax-advantaged savings plan available to Canadian citizens, similar to the esteemed TFSA. Where a TFSA is used to save for yourself, however, an RESP is reserved exclusively for your child’s future education. To learn more about how an RESP works, check out The Registered Education Savings Plan (RESP) explained.
An RESP has a lifetime limit of $50,000 but has no annual contribution limit. This means it’s a great tool for financially responsible parents! Your child’s RESP can be used for any post-secondary education, which includes apprenticeship programs, trade schools, colleges, or universities.
The RESP is an (almost) risk-free investment because if your child decides against post-secondary education, all deposits are returned to you. The only catch is government grants such as the CLB or the CESG will be returned straight to the government, so keep that in mind!
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What is the Canada Learning Bond?
The Canada Learning Bond, or CLB, is a government grant to be used by low-income Canadian families to increase the total of their child’s RESP. Low-income families receive additional deposits into each child’s RESP for every eligible year through the CLB.
When all is said and done, each RESP is subject to a maximum total of $2,000 in free money through the CLB. A couple of grand goes a long way in aiding your child’s academic future!
How is the Canada Learning Bond Calculated?
This is one of the simpler calculations when it comes to government funding. An eligible RESP will receive $500 in its first year, with an additional $100 for every eligible year after that. The lifetime maximum given out under this grant is $2,000. Since eligibility depends on your household’s annual income, it’s very possible that you’re eligible for one year and then not the next.
Although each deposit should be deposited automatically, I’m sure you don’t need me to tell you not to trust the government. Since eligibility is a little touchy for this grant, be sure you know whether or not you’re meant to be receiving the CLB each year.
Check on your RESP each year to ensure your getting the money you should be! It would take a total of 16 eligible years to max out the CLB, so make sure they’re being counted correctly!
Am I Eligible for the Canada Learning Bond?
Before your child can receive their cut of the Canada Learning Bond, they must have an RESP registered in their name. They must also:
- Have been born on or after January 1, 2004
- Be a Canadian resident
- Have a valid SIN
Beyond this, the eligibility for the CLB is based on two things: the adjusted net income of your family and the number of eligible children in your household. The full chart provided by the government of Canada can be found here, but the first few lines are as follows:
| Eligible Children in Household | Adjusted Net Household Income |
| 1-3 | $48,535 or less |
| 4 | less than $55,764 |
| 5 | less than $61,016 |
| 6 | less than $67,268 |
If your salary falls within these limits, you’re eligible for the Canada Learning Bond! As previously mentioned, the correct amount should be directly deposited into your RESP should you fall in this category.
How do I get the Canada Learning Bond?
The first step, if you haven’t figured it out already, is to open an RESP account for your child. The best RESP options in Canada are as follows:
Unlike with the Canada Education Savings Grant (CESG), there is actually no contribution necessary in order to receive your child’s CLB funds. All you need is an RESP open for them, and the eligible amount of money will be automatically deposited. Be sure to check that your RESP promoter offers government grants as well!
If your child’s future doesn’t end up including any post-secondary education, the savings in their RESP will be returned to you. Any government additions, however (such as the CLB and the CESG) will be returned to the government. Both of these additions are also non-transferable, meaning they can only be used for the child for which the RESP was named.
Use Every Available Resource
If eligible, you could add a total of $9,200 of free money to your child’s RESP through the Canada Learning Bond and the Canada Education Savings Grant. In most Canadian universities, that covers a year of tuition.
As a parent, committing to making the most out of the resources available to you and your family can forever change the life of your child! The rising cost of tuition is consistently deterring Canadian citizens from attending post-secondary, even if it’s a necessary degree! At the rate we’re going, your child will need all the help they can get.
Use Your RESP to Protect Your Family’s Wealth
An RESP is a great step towards your child’s eventual financial freedom. Grants like the Canada Learning Bond and the Canada Education Savings Grant just further the advantages. Plus, if you’re eligible they require little to no extra work. Free money is the best money! Each child could have almost $10,000 extra for their academic future!
I can’t say it enough: my life would be so much better if my parents ever opened up an RESP. Part of looking out for your child’s best interest is providing for them an opportunity to pursue their passions. These passions may or may not include post-secondary education, but again your RESP funds will be returned to you if not! In an increasingly unpredictable and unstable world, investing is one thing you and your family can count on.
1 Comment. Leave new
An informative article. We had RESPs for our children. You can’t beat those grants! In an effort to further educate your readers, I hope you don’t mind me elaborating on what can additionally happen to RESP funds – specifically the grants and income – if the child (aka beneficiary) does not attend PSE or use all their EAPs – income, grants & grant income make up the Education Assistance Payments.
Depending on the type of RESP, such as an Individual Plan, the beneficiary can be replaced in some instances and the grants received by the original beneficiary may be retained by the replacement beneficiary if grant room remains.
In Family Plans, the rules are different, depending on the relationships between the subscriber and the beneficiary/ies, and this can affect whether Additional CESG in the Family Plan is retained or returned to the government. This issue usually arises when the subscriber is a grandparent who opens a Family Plan for all of their grandchildren, which may include cousins, and when funds are transferred in from another RESP. This is not usually a common scenario.
CLB is always returned to the gov’t if the student does not take post secondary courses (ie university, college, trade school, apprenticeships, full or part time courses), as the CLB is beneficiary specific.
If the beneficiary does not attend post secondary and is not replaced on the plan, the income generated on the contributions, grants and CLB can be transferred to the subscriber’s RRSP, tax free, as an AIP Accumulated Income Payment, if they have the contribution room, provided the RESP has been opened for 10 years or more and the beneficiary is at least 21 years of age. If the AIP is taken as a withdrawal, there is a 20% withholding to the government, in addition to being taxed at the subscriber’s tax rate, since the funds in the Plan had earned income tax-free during the life of the plan.
Despite this, it’s much better to save in an RESP, attract the 20% grants (or more, as well as the Canada Learning Bond, depending on family income), earn income on the contributions and grants, than to do nothing and leave your child to accumulate mounds of student debt and enrich the pockets of bank shareholders.