Morgan Ulmer CFP®

Morgan Ulmer CFP®

Certified Financial Planner® professional

Morgan joined the team in February, 2019 with 8 years of financial planning and financial literacy training under her belt. She is as comfortable working on complex financial planning engagements as she is helping young adults understand budgeting and debt management.

Free money

Registered Education Savings Plans (RESPs) are the best way to save for your children’s education.  That’s because the government provides at least a 20% match of your contributions*, and who doesn’t love free money?  These matching funds come by way of the Canada Education Savings Grant, which is deposited directly into the RESP account.  

An RESP account can attract a lifetime maximum CESG of $7,200.  For example, if you contributed $208 per month into your child’s RESP from when they were born, and if you received a 20% match, the CESG would be maximized when your child was 14 years and 5 months old.  

Finding out how much free money has been received

Unless you follow this ‘perfect’ approach to RESP savings (and most parents do not), you may not have a clear idea as to when the account is getting close to the CESG limit.  Don’t worry, you will not have to build a spreadsheet to find out!  

Although it is not the easiest number to find, you can contact the Canada Education Savings Program directly at 1-888-276-3624 to find out how much CESG has already been attributed to your child.  You will need to know your child’s SIN. 

Note that you can still contribute up to $50,000 on behalf of a child to their RESP, but the account will not attract matching funds once the CESG has been maximized. 

Family RESPs missing out on hundreds of dollars

In our family, we have all three children’s RESPs under one family RESP account.  Until recently, the default allocation for our annual contribution was 33.3% to each child. 

Now that our oldest is 14 and a half, she has approached the maximum CESG limit.  This requires that two actions be taken:

  1. Halt further RESP contributions on her behalf to the account
  2. Adjust the percent allocation to 50% to the remaining two kids, and reduce her allocation to 0%.

The second point above is important, and one that could get easily missed in a Family RESP. If the reallocation is not done, then future RESP contributions would continue to be attributed to her. This would mean that: 

  1. Future contributions would not attract CESG on her behalf and 
  2. The other children would unnecessarily miss out on some CESG.   

Family RESP example

Let’s use more concrete numbers to clarify.  

  • Up until now, RESP contributions have been $7500 per year ($208 per month, per child).  Each child’s RESP receives ⅓ of that amount.
  • Oldest child has maximized the CESG. Therefore, contributions are now reduced to $5,000 per year. 
  • If allocation is not changed, this $5,000 would continue to be split ⅓ to each child ($1666 each).
  • Oldest child does not receive CESG because maximum limit already received.  Other two children receive only $333 each in CESG instead of $500 each ($1666 X 20% = $333).
  • Therefore, allocation must be changed to 0% oldest child and 50% each remaining children to get maximum CESG for them. This typically cannot be done online and you will be required to fill in a form.

Your financial institution will likely not be on the watch for maximized CESG, nor will they proactively suggest reallocating the Family RESP contributions.

This means that your children could be missing out of hundreds of dollars in free money!  

Your next step

Be aware of how close your child or children are to their CESG limits, especially if you’ve had the RESP open for a while. You can find out by calling the Canada Education Savings Plan at 1-888-276-3624.  From there, you may need to adjust your contribution amounts and/or the defaults of your Family RESP allocation. 

If you have questions, be sure to speak to your advisor.  

* Subject to annual and lifetime maximums. For more information visit the Employment and Social Development Canada site.

This information is of a general nature and should not be considered professional advice. Its accuracy or completeness is not guaranteed and Queensbury Strategies Inc. assumes no responsibility or liability.