Raising a child in Singapore is no mean feat, both emotionally and financially. Thus, parents need to get all the financial hacks you can get to let you do more with less. Let’s start with the basics by exploring how you can better utilize your child’s Child Development Account (CDA) to do more with less.
1. Stretch your child’s CDA with the government’s dollar matching
In order to encourage parents to save more for your child’s CDA, the government adopts a dollar-for-dollar matching gift method. Instead of just depositing cash upfront into your child’s CDA, the government tops up the CDA whenever you make a saving. For example, when you deposit S$2,000 into your child’s CDA, the government will top it up with another S$2,000. Thus, by saving S$2,000, you can add S$4,000 to your child’s CDA. But before you start thinking about transferring your whole bank account into your child’s CDA, note that there is a cap.
|CDA Benefits||Total CDA Benefits|
|CDA First Step||Dollar-for-Dollar matching|
1st & 2nd Child
|$3,000||Up to S$3,000||Up to S$3,000 dollar-for-dollar matching + CDA First Step|
|3rd & 4th Child||Up to S$9,000||Up to S$12,000 dollar-for-dollar matching + CDA First Step|
|5th child onwards||Up to S$15,000||Up to S$18,000 dollar-for-dollar matching + CDA First Step|
Since the government is already prepared to help you top up your child’s CDA, why not let the government help you stretch your child’s CDA? All you have to do is to save in his/her CDA instead of your usual savings account. The dollar-for-dollar matching carries on all the way till your child turns 12. As long as you contribute to your child’s CDA before that, the government will do the necessary top up.
2. Earn more interest on your child’s CDA
Most people know that you can treat your child’s CDA like his/her savings account. But did you know that your child’s CDA can earn higher interest than most savings accounts? OCBC, UOB, and POSB allow you to earn 2% per annum on the account balance of your child’s CDA. However, OCBC’s CDA caps the 2% interest rate on the first S$36,000 in your child’s CDA. The rest will earn the usual interest rate of 0.05%.
POSB Smiley CDA
|Maximum Balance To Earn Higher Interest||None||S$36,000||None|
3. Enjoy more perks with your child’s CDA
Apart from the higher interest rate, there are other perks associated with your child’s CDA. These perks vary from bank to bank, so make sure you choose your CDA bank wisely.
1. POSB Smiley CDA
a. Baby Bonus NETS card
Who says only adults can have NETS card? The moment your child’s CDA gets activated, you will be able to get a Baby Bonus NETS card. This card allows you to get exclusive deals with DBS’ partners like VitaKids and 10 10 Mother & Child Essentials. It lets you get your baby essentials at a lower price.
b. Cash rebate on medical spending
It is almost inevitable that kids will fall sick while growing up. (Think Hand Foot Mouth Disease). This makes medical spending an essential spending that is just waiting to happen. If you open your child’s CDA with POSB, you will be able to enjoy 3% cash rebate for n-site medical services made at hospitals, medical and dental clinics.
2. OCBC CDA
OCBC’s CDA can be said to offer the best peripheral perks for a CDA. Apart from offering a Baby Bonus Card with discounts from participating merchants, it offers incentives for signing up much-needed insurance plans. For example, if you purchase a personal accident protection plan, you can get a 40% discount for the first year. If you get a MaxMaternity Care plan, you can get an additional S$108 rebate into your child’s CDA.
The only downside is that OCBC has a S$36,000 cap for the higher 2% interest. That aside, OCBC’s CDA does look the most attractive amongst the three banks.
3. UOB CDA
UOB’s CDA is probably the most plain-vanilla among the three banks. It offers … nothing more than the higher interest rate and dollar-for-dollar matching from the government. In its defence, UOB does provide a UOB Baby Bonus Card. However, it just makes payment easier without much financial incentives.
4. Pay for your child’s expenses with his/her CDA
While you are not entitled to withdraw from your child’s CDA, you can still use his/her CDA to pay for his/her own expenses. There are a number of types of services where you can pay for using your child’s CDA. They are:
- Childcare centres
- Kindergarten, special education schools registered with MOE or CPE
- Early intervention programmes registered with the NCSS or Centre for Enabled Living
- Healthcare institutions
- Assistive technology device providers (eg. for hearing aids)
- Optical shops
One thing to note is to make sure you check whether the service provider is part of the approved institutions before paying with your child’s CDA. You can check out the list of approved institutions here on Ministry of Social and Family Development’s website.
5. Buy an Integrated Shield Plan for your child
Newborns are at the right age for parents to get health insurance for your child. After all, they don’t suffer from any pre-existing conditions and are likely to be accepted coverage by insurance companies. Thus, an Integrated Shield Plan (ISP) is a must-get for your child, especially for parents who think far ahead.
Upon registration of birth, the government will set up a Medisave account for your child. S$4,000 will be automatically credited into his/her Medisave account. The S$4,000 can be used to pay for a Medisave-approved ISP.
However, since the money in your child’s Medisave account is earning 5% interest, why not pay for it using cash instead? You can either choose to pay using your child’s CDA or your own cash (if you want to earn the 2% interest). You do the math and make your own choice.