Economic Feasibility of Education Savings Options: Final Report - SRDC

Economic Feasibility of Education Savings Options: Final Report

Authors:Taylor Shek-Wai HuiReuben Ford

Over the past two decades, Canada and several provinces have promoted education savings as one of their key policies to help young Canadians access postsecondary education. The major vehicle for education savings is the Registered Education Savings Plan (RESP) which is the foundation of Canada Education Savings Programs (CESP).

RESPs allow investment and savings to grow tax-free until withdrawal. As an incentive for RESP holders to save each year, the federal government provides a Canada Education Savings Grant (CESG) that provides a top up worth 20 per cent of savings annually. Lower-income families holding RESPs may be eligible for additional incentives to save from the additional amount of the Canada Education Savings Grant and Canada Learning Bond (CLB).

The Canada Learning Bond is available to RESP beneficiaries from low-income families born on or after January 1, 2004. The CLB provides an initial payment of $500, and $100 for each subsequent benefit year of eligibility, up to the benefit year in which the beneficiary turns 15, to a maximum of $2,000.

The yearly eligibility is determined by the adjusted income of the beneficiary’s primary caregiver in the previous year and the key action to be taken by the beneficiary’s caregiver to receive the CLB is to open a RESP account. 1 The additional amount of CESG is worth an extra 10 per cent or 20 per cent on the first $500 contributed to a RESP each year, with the match rate determined by family income in that year

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