What is the Canada Learning Bond?

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The Canada Learning Bond (CLB) is a government grant that provides low-income families up to $2,000 in free contributions to their kids’ Registered Education Savings Plan (RESP).

There is no catch to the CLB. As long as the parents open an RESP for their children, the government of Canada will provide them with the bond every year as long as they meet the eligibility requirements and don’t exceed the maximum amount. 

What is a Registered Education Savings Plan?

Without a doubt, a Registered Education Savings Plan is the best place to save for your child’s future education costs. That’s because any capital gains or income earned is taxed in the child’s name when they eventually withdraw the money for educational purposes. The presumption is they’ll be in a lower tax bracket at that time compared to the parents who contributed to the account.

In addition, when you contribute to an RESP, you may be eligible for the additional Canada Education Savings Grant (CESG), which provides extra financial support. I’ll go into those details further below.

To be clear, once the money is in an RESP, you still need to invest it. By doing this, the money will hopefully grow, so your child will have access to more funds when they finish high school.

What is the Canada Learning Bond?

The CLB is a Canadian government program that provides low-income families with a financial boost so their eligible children can pursue full-time or part-time studies at the following:

  • Apprenticeship programs
  • CEGEPs
  • Trade schools
  • Colleges
  • Universities

What makes the CLB appealing is that, unlike the CESG, parents do not need to contribute any funds to an RESP to get the CLB. They simply need to open an RESP on behalf of an eligible child and meet the eligibility requirements.

How much does the CLB pay?

You can get up to a maximum of $2,000 in CLB payments as long as your child pursues a post-secondary education. The breakdown is as follows:

  • $500 in the first year of eligibility
  • $100 each year the child is eligible until they turn 15

So assuming the child qualifies every benefit year, you can max out the CLB funds after 15 years.

CLB eligibility

The Canada Learning Bond eligibility is based on the following:

  • You’re from a low income family
  • You’re born on or after January 1, 2004
  • You’re a resident of Canada
  • You have a valid Social Insurance Number (SIN)
  • You are named in an RESP

As for the low income eligibility amount, it’s based on the following:

  • Number of children in the family
  • Adjusted income of the primary caregiver, including the income of a cohabiting spouse or common-law partner

The net income requirement is updated every year, so you should check the government of Canada website for the most updated info. As an example, for July 1, 2022 to June 30, 2023, free CLB money was available for families that have 1 to 3 children and an adjusted income level equal to or less than $50,197.

How to apply for the CLB

To complete your application for the Canadian Learning Bond, you need to do the following:

  • Gather all relevant personal information – This would include you and your child’s SIN number. If the subscriber (the person who opened the RESP) is not the child’s primary caregiver, you’ll need their SIN too.
  • Open an RESP – Setting up an RESP takes just a few minutes. Once set up, they can fill out the application forms to process the CLB.
  • Wait for the deposit – Once the application is approved, the Canada Learning Bond will usually be deposited within four weeks.

Remember, you don’t need to make any contributions to the RESP to qualify for the CESG. In addition, once the money is in the account, be sure to invest it.  

Who should apply for the CLB?

If you meet the net family income requirement for the CLB, there’s no reason you shouldn’t apply. You’re literally getting free money from the government. 

Even if you think your income will go up in the future, or you currently don’t meet the income thresholds, you should consider opening an RESP since it’s the best way to save for your child’s future education costs.

Small contributions go a long way. Let’s say you contributed $20 a month from the day your child is born until they turn 17. When factoring in the CESG, and a 5% yearly return on investments, they’d have a total value of about $7,000.

What is the Canadian Education Savings Grant?

The CESG is an additional government incentive that provides a 20% match on RESP contributions up to $500 a year. That means if you contribute $2,500 each year, you will get the full CESG. The lifetime maximum for the CESG is $7,200.

However, it’s worth noting that if you qualify for the Canada Learning Bond, you’d also get up to an additional $100 from the CESG. That means when you combine the CESG and CLB, low income families could get up to $700 in grants each year. Of course, that’s easier said than done since it would require you to contribute funds to an RESP.

What happens if the RESP is not used?

Not everyone will decide to pursue post-secondary education. If this were to happen, CLB and CESG contributions would be returned to the government. Any personal contributions would be returned to the person who opened the plan. 

Note that you don’t have to close an RESP until the 36th year after it’s opened, so there’s no rush to shut it down.

How to open an RESP

Opening an RESP is easy as you would only need the following information:

  • SIN for yourself
  • SIN for your child

Since you can get a SIN right when your child is born, you can set up an RESP almost immediately.

Just go to a participating RESP promoter, as they can help you set up an RESP. As mentioned, the Canada Learning Bond will take a few weeks to deposit into the RESP. Once it’s in there, you can invest the funds.

Don’t worry, your financial institution can recommend an investment strategy suited for your child. If you want to keep your fees down, so your child can potentially end up with more money, consider using a robo advisor such as JustWealth.

About Barry Choi

Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. His blog Money We Have is one of Canada’s most trusted sources when it comes to money and travel. You can find him on Twitter:@barrychoi

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