Can I Open an RESP Before My Child is Born?

Whether you’re expecting a child or simply planning ahead, for many Canadian families, saving for their child’s post-secondary education begins long before the child is even born. With the rising costs of tuition and living expenses, opening a Registered Education Savings Plan (RESP) can feel like you’re making a smart financial move and getting a head start.

Although there are certain aspects of RESPs you can plan in advance, some steps legally require your child to be born beforehand. Take a closer look at what you can get done today, what needs to wait, how to make your first deposit stress-free, and more below.

What You Can Set Up Before Baby Arrives

While you won’t be able to fully activate an RESP without your child’s social insurance number (SIN), you can lay some of the groundwork to start an RESP:

1. Open an RESP Account

Many RESP providers will allow you to create an RESP account in your name as the subscriber without naming a beneficiary. You’ll be able to choose between an individual plan (for one child) or a family plan (for multiple children).

2. Provide Your Own SIN

As the RESP subscriber, you’ll need to provide your own SIN to register the RESP account.

3. Set-Up Funding

To make saving seamless once your child is born, consider setting up pre-authorized deposits from your bank account into your RESP.

4. Pick Your Investment Strategies

With RESPs, you have the option to choose from low, moderate, and high-risk investment strategies, depending on your tolerance. While funds won’t be invested in your child’s name yet, there’s nothing wrong with deciding what your risk tolerance is beforehand.

5. Create a Savings Schedule

Determine how much money you want to contribute monthly. For example, depositing $250 a month will total to $3,000 at the end of each year, which qualifies you for the full Canada Education Savings Grant (CESG) once your beneficiary is eligible.

What Needs to Wait Until After Birth

Certain steps in the RESP process need to be completed after your child is born, including:

Apply for a Valid Social Insurance Number (SIN)

You’ll need to apply for your child’s SIN after they are born. This SIN is required before you can designate eligible children as RESP beneficiaries. We recommend applying for your child’s SIN as soon as possible after they are born, so they can claim their grant money as soon as possible.

Naming the Beneficiary

When you open an RESP with your RESP provider, the account will remain incomplete until your child’s name, birthday and SIN are listed on the account.

Grant Eligibility Criteria: Canada Education Savings Grant (CESG) & Canada Learning Bond (CLB)

Before you can collect government grants or bonds, your RESP will need to be tied to a beneficiary with valid identification.

Timeline for First Deposits & Grants

The Canada Education Savings Grant (CESG) provides a 20% match on your annual contributions up to a maximum of $2,500 ($500 per year, per beneficiary). Lower-income families can also apply for the Canada Learning Bond (CLB), which provides an additional $2,000 per child.

First Eligible Deposit

Once your child has a SIN and is named as the beneficiary on the RESP, any funds you contribute to the RESP become grant-eligible. For example, if your baby is born in May, and you receive their SIN in July, contributing $2,500 that year will secure the full $500 in CESG money for that year.

Starting deposits in year one will help you maximize your lifetime maximum CESG room, which caps at $7,200 per child. But, if you’re unable to contribute money to an RESP in any given year, you can catch up by contributing up to $5,000 in a future year.

Choosing Between Individual and Family Plans

When you open an RESP, you’ll have the option of choosing between an individual and family plan. Here’s a closer look at the difference between the plans, so you can choose the right RESP for your child:

Individual RESP

• Only one child can be named as the beneficiary.
• Best for families who plan to have only one child or want to separate funds between each child.

Family Plan

• Great for families with multiple children.
• RESP savings are pooled into a single account, but contributions and government grants are still tracked seperately, per child.
• If your child doesn’t pursue post-secondary education or has leftover funds, a sibling by blood or adoption can use the remaining money if they are below RESP contribution and CESG maximums.
• Convenient for grandparents who want to contribute to multiple grandchildren, who are siblings, under one RESP.

Coordinating with Partners & Grandparents

A common mistake many parents and grandparents make is going over their RESP contribution limit in family RESP plans. Ensuring that the $50,000 lifetime maximum for each child is maintained is essential, especially if separate RESP accounts are opened for the same child.

To avoid duplicate contributions:

• Use a RESP Funds Tracker: Using a spreadsheet or notes app can help you track contributions across all contributors into the account.
• Gift Strategy: Grandparents and other family members can contribute lump sums for holidays and birthday gifts. Just make sure to confirm how much contribution room is left before doing so.

So what happens if you go over the contribution limit when saving for your child’s post-secondary education? A 1% tax penalty is applied to the RESP each month until the excess money is withdrawn from the account.

Documents & Setup Checklist

To open an RESP for your child’s post-secondary school, you’ll need the following documents:

Before Birth (Subscriber)

• Your SIN
• Government-issued ID
• Banking details for contributions.
• Investment strategies and risk profile.

After Birth (Beneficiary)

Child’s birth certificate.
Child’s SIN.
Proof of birth registration (varies by province).
Grant application forms (your RESP provider does this on your behalf with your RESP application).

Common Mistakes to Avoid

Common mistakes to avoid when you open an RESP include:

• Over-Contribution: With multiple accounts or numerous contributors, it’s easy to go over the $50,000 lifetime maximum.
• Not Tracking Tax Implications: The money you contribute to the RESP can be withdrawn tax-free. But, education assistance payments (EAPs), which consist of investment income and grants, are considered taxable income in the hands of the student.
• Waiting Too Long to Start: Delaying contributions will reduce your CESG room and compound growth potential.

Special Cases & FAQs

• Adoption or Guardianship: Once the child’s SIN is assigned, adoptive or legal guardians can name the child as a beneficiary.
• Multiple Children: A family RESP allows siblings to share funds, even though CESG money is tracked per child.
• Separation/Divorce: RESPs can have joint subscribers, but contributions and withdrawals should be clearly outlined in all parental agreements.

Your Child Decides Not to Attend a Post-Secondary Educational Program

If your child chooses not to attend post-secondary school, you can transfer funds to another child in a family plan or transfer the money to your RRSP if you have contribution room. You can also withdraw money (contributions) tax-free, but government grants must be repaid if they are unused.

Action Plan: From Pregnancy to First Deposit

Are you expecting? Here’s a month-by-month action plan you can use to prepare your family before opening an RESP:

During Pregnancy

• Open an RESP with your chosen financial institution or alternative provider, like Embark.
• Decide on an individual or family RESP.
• Choose an investment method.

At Birth

• Apply for a SIN.
• Submit documents to your RESP provider to name your RESP beneficiary.

First 3 Months After Birth

• Make your first contribution.
• To obtain full government grants for the year, aim to deposit $2,500.

First 6 Months

• Review your savings and investment mix.
• Coordinate with family members to prevent going over your contribution limit.

First Year Wrap-Up

• Confirm $2,500 was deposited.
• Organize grant confirmations for your records.

Starting the process of opening an RESP before they’re born will set them up for long-term success. To take the first financial steps toward your baby’s future, connect with an Embark Education Savings Specialist today!