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The trick to acing personal finance is to start early.
How early, you ask? As early as your child is born!
Besides receiving a token sum from the government for contributing to the birthrate, you can also look into depositing their yearly ang bao money to start building their savings while they grow up.
TL;DR: What’s the best savings account for your child?
Every Singaporean baby is eligible for the Baby Bonus scheme, which is Singapore’s way of saying “Make more babies!”
What is the Child Development Co-Savings (Baby Bonus) Scheme?
The baby bonus scheme consists of a three-pronged approach to kick-start your child’s long-term financial plans, namely:
- Cash Gift
- Child Development Account (CDA) First Step Grant
- Government matching to savings
Parents can start joining the scheme as early as two months before the child’s estimated delivery date.
Since the revision of cash gift amounts in 2015, parents will receive an enhanced cash gift(for their children) in 5 instalments, over 18 months.
First and second-born children will first receive an upfront cash gift of $3,000, while third and subsequent births will be entitled to $4,000.
This is followed by 4 other pay-outs in installments.
To check that your child is eligible for the CDA, take the questionnaire here.
Child Development Account (CDA)
The CDA is a special savings account for children that can be opened with POSB/DBS, OCBC or UOB, to help build up the savings that can be spent on approved uses.
The child will receive CDA benefits:
| Child Order | CDA Benefits | Total CDA Benefits | |
|---|---|---|---|
| CDA First Step | Dollar-for-dollar Matching | ||
| 1st & 2nd child | $3,000 | Up to $3,000 | Up to $6,000 |
| 3rd & 4th child | Up to $9,000 | Up to $12,000 | |
| 5th child & subsequent | Up to $15,000 | Up to $18,000 | |
Table credit: Baby Bonus Scheme, Ministry of Social and Family Development
CDA First Step
- All Singaporean children born from 24th March 2016 onwards will receive an initial $3,000 grant in their CDA.
Government dollar-for-dollar matching contributions
- If you deposit $1,000 into the CDA, the government will give you an additional $1,000 the next month. (Up to $15,000)
The CDA account can be kept open until your child is 12 years old, so use those all those years to save up the amount necessary to bag you the entire bonus.
What can the CDA be spent on?
Approved uses of the CDA
The CDA can be used to offset baby expenses including, but are not limited to:
- Child Care Centres
- Kindergartens
- Special Education Schools
- Providers of Early Intervention Programmes
- Providers of Assistive Technological Devices
- Medical-related Expenses (eg. Approved Vaccinations at Polyclinics)
- MediShield or Medisave-approved Private Integrated Plans
You can view a full list of approved institutions (AIs) which you can use your CDA here.
Comparison of CDA Accounts With POSB, OCBC and UOB
| OCBC CDA | POSB CDA | UOB CDA | |
|---|---|---|---|
| Interest rate on CDA account | Up to 2% 0.60% a year on first $10,000, followed by 0.80% a year on next $10,000 and 2% a year thereafter | 2% p.a. (up to $50,000), no min. balance | 2% p.a, no cap |
| Promotion Gifts | Welcome Bundle worth $250 | POSB Parent Starter Kit: Nursing Shawl by Philips, Pampers Premium Care Tape Diapers – Newborn Size by P&G, Disposable Breast Pads by Philips, Breast Milk Storage Cup by Philips Promotion period: 1 July 2020 - 30 June 2021 Limited to first 3,000 redemptions on a first-come-first-serve basis, while stocks last | Purchase an insurance policy to protect yourself or your child and receive up to S$800 worth of CapitaVouchers |
| Merchant Deals | OCBC Baby Bonus Card Learn & Play: Promotions from Genius R Us, Juzmusic Academy, Katapult Trampoline Park etc Health: $10 Eyescreen package, Madam Partum discount Childcare: 10% off Kinderland fees Shop & Eat: 10% Best Imprezzione products, 10% off Coffeemin private event bookings, $10 off Lulu's Celebratory Box, 20% off Mokksies products, etc | POSB Baby Bonus NETS card Baby Toys & Education: 50% off Magic Forest products, and 5% off My Greatest Child products Baby Personal Care & Wellness: 28% off BabySpa services, 10% off PramWash services, 20% off Twinkle products Family Leisure & Dining: 10% off Orange Studio photoshoot packages Others: Promotions for Madam Partum products, Schone Mama treatments | - |
| Kids savings account | Up to 0.2% per year interest on Mighty Savers® Account opened jointly between parent and child, with $50 monthly deposit | POSB My Account Earn daily interest with no minimum deposit and fall-below fee until your child turns 21 years old Waiver of coin deposit fee until your child turns 16 years old Attractive account opening gifts: A S$1 gift deposit Free 1-year POPULAR Bookstore Student Card Membership | - |
| 31 Dec 2020 | 31 Dec 2020 | - |
Comparison of Children Accounts That Offer a Better Interest Rate Than the Usual 0.05%
For parents looking beyond the CDA considerations, here is a breakdown of accounts that offer a better interest rate than the usual 0.05%.
| Account Type | CIMB Junior Saver | Maybank Youngstarz |
|---|---|---|
| Interest Rate | Up to 0.70% First S$200,000: 0.40% p.a. Next S$800,000: 0.70% p.a. Above S$1,000,000: 0.40% p.a. | Effective interest rate up to 0.3% First $3,000: 0.1875% Next $27,000: 0.3125% |
| Minimum Initial Deposit and Balance | $1,000 minimum deposit, no fall-below fees | $10 minimum deposit, no fall-below fees |
| Eligibility | 12 & Below | 16 & below |
| Other Features & Fees | - | Exclusive privileges during child's birthday month Hand, Foot & Mouth Disease Hospitalisation and Outpatient Insurance Worldwide Personal Accident Insurance coverage for parent and child |
Verdict
Comparing across all CDAs offered by the banks, POSB and OCBC brings a contentious fight to the table.
Both POSB and OCBC offer welcome bundles with products which might be useful for parents.
They also offer a range of merchant deals for parents to choose from, ranging from education to personal care.
As for the interest rates, both POSB and UOB offers the best deal – a straightforward 2% p.a..
For savings accounts, both the CIMB Junior Saver and Maybank Youngstarz accounts are comparable.
CIMB Junior Saver offers a higher interest rate, while Maybank Youngstarz has a lower minimum deposit.
In addition to your considerations when choosing the right savings account, one major factor would also be where and how the money would go, and at what age would this account have to be terminated.
The Complete Guide: Best Children’s Savings Account (CDA)
Being a parent is not easy, but getting a headstart to your child’s personal finance would definitely help.
If you have any queries or concerns about parenting, know that you are not alone!
You can share your thoughts with our fellow parents in the Seedly Community. 👪
