Welcoming your child into this world is one of the greatest joys a parent can experience. Celebrating alongside you is none other than your government in Singapore. And with the country’s fertility rate at 0.97 (as of 2023), it is not difficult to see why.
The Government welcomes your child with a Baby Bonus cash gift of $11,000 or $13,000, depending on the child’s birth order (payable over 6.5 years). This money is given to help lighten the financial costs of raising your child.
In addition to the baby bonus cash gift, your child will also qualify for a Child Development Account (CDA), which you can choose to open with one of the local banks – OCBC, DBS/POSB, or UOB. Parents can choose to save money in the Child Development Account (CDA) until their child turns 12.
In Budget 2016, the government also introduced the CDA First Step Grant, which provides an automatic contribution of $3,000 to a child’s CDA. This has been increased to $5,000 in Budget 2023 for children born on and after 14 February 2023.
The Child Development Account (CDA) can be used for various child-related expenses. Here are 6 things we think you should already be doing with your Child’s CDA.
#1 Get The Government’s Dollar-For-Dollar Matching
On top of the First Step Grant of $3,000 for each child, or $5,000 for children born on and after 14 February 2023, the government will match any savings made to the child’s CDA on a dollar-for-dollar basis, capped at the following:
1st child: Dollar-for-dollar matching capped at $3,000 per child. Total CDA Benefits from the government will be up to $6,000 inclusive of the initial CDA First Step Grant. For children born on and after 14 February 2023, dollar-for-dollar matching is capped at $4,000 per child, with a total CDA benefit of up to $9,000 inclusive of the initial CDA First Step Grant.
2nd child*: Dollar-for-dollar matching capped at $6,000 per child. Total CDA Benefits of up to $9,000 inclusive of initial CDA First Step Grant. For children born on and after 14 February 2023, dollar-for-dollar matching is capped at $7,000 per child, with a total CDA benefit of up to $12,000 inclusive of the initial CDA First Step Grant.
*Do note this is only applicable for children who are born or have an estimated date of delivery, on or after 1 Jan 2021. If a child is born before 1 Jan 2021, the maximum Government co-matching is $3,000.
3rd and 4th child: Dollar-for-dollar matching is capped at $9,000 per child. Total CDA Benefits are up to $12,000, inclusive of the initial CDA First Step Grant. For children born on and after 14 February 2023, dollar-for-dollar matching is also capped at $9,000 per child, with a total CDA benefit of up to $14,000, inclusive of the initial CDA First Step Grant.
5th child and beyond: Dollar-for-dollar matching capped at $15,000 per child. Total CDA Benefits of up to $18,000 inclusive of initial CDA First Step Grant. For children born on and after 14 February 2023, dollar-for-dollar matching is also capped at $15,000 per child, with a total CDA benefit of up to $20,000 inclusive of the initial CDA First Step Grant.
For Children Born Before 14 February 2023
For Children Born On & After 14 February 2023
This dollar-for-dollar match for the child’s CDA remains until he or she turns 12. So, parents can make regular contributions to the child’s CDA whenever funds are running low and get the government to help match it. There is no need for you to rush to deposit all at once in the CDA’s to get the entire dollar-for-dollar amount (though there are good financial reasons for doing it)
Do note that for Singapore Citizen children who are born between 17 August 2008 to 23 March 2016, the dollar-for-dollar matching from the government is higher by $3,000. That’s because children born on 23 March 2016 and earlier do not enjoy the initial $3,000 CDA First Step.
Pro tip: You can check the Baby Bonus website to find out how much you have contributed to your Child’s CDA. This will prevent you from overcontributing beyond what you will get from the dollar-to-dollar matching.
Read Also: How Can You Maximise The Baby Bonus Cash Gift
#2 Open A CDA With A Bank Which Gives You The Benefit You Want
You can open your child’s CDA with one of the three local banks – OCBC, DBS/POSB, or UOB. This can be done entirely online and even through the LifeSG app. Upon opening the account, the government will credit an initial First Step Grant of $3,000 (for those born after 23 March 2016) or $5,000 (for children born on and after 14 February 2023
While the functionality of the Child Development Account (CDA) is similar across the three local banks, they do offer slight variations in terms of benefits to account holders. For example, both OCBC and DBS/POSB have partnerships that offer discounts or perks with selected merchants.
Interest rates may differ as well. Currently, interest rates are as follows (as of 29 July 2024)
UOB
First $25,000 – 1.00%
Next $25,000 – 2.00%
Above $50,000 – 0.05%
DBS/POSB
First $10,000 – 1.00%
Next $40,000 – 2.00%
Above $50,000 – 0.05%
OCBC
First $10,000 – 1.20%
Above $10,000 – 2.40%
Note that interest rates and merchant partnerships are not fixed. So you should not be surprised if the benefits change over the years. The good news is that if you are unhappy with your CDA bank, you can submit an application to the MSF Baby Bonus website to change the bank.
Pro tip: Choose a bank with which you already have internet banking. This will give you the convenience of accessing and monitoring the account using the same login rather than having to apply for another login.
#3 Pay For MediSave-Approved Integrated Shield Plan
We encourage parents to purchase a private integrated shield plan for their children while they are still young. At a young age, children are less likely to have pre-existing health conditions and, hence, can obtain full coverage with no exclusions.
A private integrated shield plan ensures that the insurance company will continue to cover any future conditions for as long as the policy is in effect.
Rather than fork out cash or use your Medisave account to pay for the insurance premiums, one alternative is to use your child’s CDA account to pay instead. Because of the dollar-for-dollar match received from the government, you would, technically, actually be paying only 50% of the premiums – at least until the CDA funds run out. Do note that not all insurers
To clarify, upon registration of birth, your child will receive a Medisave Account with $4,000 from the government automatically. You could also use the Medisave account to pay for the private integrated shield plan.
Pro tip: It is worth noting that your child’s Medisave Account will earn an interest of 5% per annum (since he or she would have less than $60,000), while money in the CDA would only earn up to 2%. However, MediSave funds tend to have limited usage, while CDA can be spent on more things. Which makes more financial sense? We will let you mull over it.
Read Also: Types Of Insurance To Buy For Your Children
#4 Childcare Centres And Kindergartens
The cost of pre-school education in Singapore is not cheap. However, parents can use the Child Development Account (CDA) funds to help pay part of the school fees.
Similar to paying for insurance, it makes more financial sense to top up the Child Development Account (CDA), get the government’s dollar-for-dollar matching, and then use the money to pay for childcare or kindergarten fees. Since school fees are not cheap, your funds will deplete quickly.
Do note that the Child Development Account (CDA) funds can only be used at approved institutions.
Pro Tip: Since most pre-schools only allow school fees to be paid using cash, cheque, GIRO or bank transfer, which don’t earn you any perks, it may be better to use your CDA funds to pay for pre-school education, and to pay for other child-related expenses using your credit cards, which can earn you cashback or miles.
#5 Pay For Child Medical-Related Expenses
Child medical-related expenses may also be paid out of his or her Child Development Account (CDA). If you have already bought full hospitalisation coverage for your child, you won’t have to worry about that. However, other medical expenses you may still incur include child vaccinations, outpatient treatments, and the cost of medicine at the pharmacy.
Some of these treatments may also be payable via your child’s Medisave Account. Parents would need to decide if they rather use their child’s CDA or their Medisave Account, bearing in mind that the Medisave account earns more in interest.
Pro Tip: Most hospitals, polyclinics and child specialist private clinics will allow you to pay the bill using your CDA. So remember to bring your CDA ATM card whenever you bring your child for a visit.
#6 Pay For Vitamins, Health Supplements And Optical Appliances
Aside from using the funds to pay for insurance, education, and medical expenses, parents can also use Child Development Account (CDA) funds to purchase everyday items such as vitamins and health supplements for their children. Funds can also be used at optical shops to buy spectacles or contact lenses.
Be sure to remember that these can only be used at one of the approved institutions.
Pro Tip: Because you can pay for most of these items with your credit cards, it would be a better idea to keep your CDA savings for other child expenses, such as pre-school education, where you can’t use your credit cards. This way, you get additional benefits such as cashback and miles.
What Happens To Unused Funds After The Age of 12
If you are not able to expend all the funds in the Child Development Account (CDA) by the time your child turns 13, the remaining balance will automatically be transferred to your child’s Post-Secondary Education Account (PSEA). So there is no need to worry that you will not be able to finish using up the funds by age 12.
Pro Tip: Because you can earn 2% p.a. interest on your child’s CDA, including the government top-up, it makes sense to top up your child’s CDA as early as possible.
Read Also: Here’s Why It Makes Financial Sense To Top-Up Your Child’s CDA As Early As Possible
This article was first published on 5 November 2015 and has been updated to include the latest information, such as higher co-funding support for parents with their second child.
The post 6 Ways For Singapore Parents To Maximise The Child Development Account (CDA) appeared first on DollarsAndSense.sg.
