Embarking on the journey of parenthood in Singapore comes with its unique set of challenges and joys, especially when it comes to financial planning for your little ones.
After speaking to our partner financial advisors, hours of research, and speaking with many of our readers, I’ve come to appreciate the lifeline the Child Development Account (CDA) offers.
It’s like discovering a secret financial toolkit designed specifically for your child’s early years.
In this post, you’ll uncover:
- The essentials of the Child Development Account and how it benefits your child
- Insights into eligibility criteria, including for adopted children
- A breakdown of interest rates and how to maximise your CDA
- Guidance on withdrawals and the strategic timing for opening a CDA
- Practical tips on making payments with your CDA
Whether you’re a new parent feeling a bit lost in the maze of financial products or you’re on your way to welcoming another member to your family, this guide is tailored to shed light on how the CDA can be a cornerstone in securing your child’s future.
So, if you’re looking to navigate the financial planning seas with more confidence and less worry, you’re in the right place.
Let’s dive in and explore how to make the most of the Child Development Account for your little one’s benefit.
What is the Child Development Account (CDA)?
The Child Development Account (CDA) is a special savings account for your newborn child that you can use to pay for various expenses such as education or healthcare.
It’s essentially Singapore’s way of giving parents a financial high-five for having more babies.
This special account is all about helping you, the parent, with the costs that come with raising your little ones.
How does the Child Development Account work?
The Child Development Account (CDA) is a cornerstone of the Baby Bonus Scheme, a thoughtful initiative by the Singapore government designed to support families in the joyful yet financially demanding journey of raising children.
So you definitely need to know a little bit more about that first.
The Baby Bonus Scheme
Imagine the Baby Bonus Scheme as a multifaceted support system, crafted to ease the financial load on parents right from the moment their little one arrives.
It’s a long-term plan to ensure every child in Singapore gets a great start in life.
The scheme is twofold: a cash gift (Baby Bonus Cash Gift) to celebrate and support the new addition to your family, and the Child Development Account (CDA), a special savings account that sails alongside your child’s early years.
Baby Bonus Scheme and the CDA
The CDA is the savings pillar of the Baby Bonus Scheme. Think of it as a dedicated fund for your child’s developmental needs.
From the moment your child is born or adopted, this account becomes a key player in your financial strategy for their upbringing.
It’s here to help cover the costs of childcare, healthcare, and education, ensuring your child’s journey into adolescence is well-supported.
But what makes the Child Development Account different from a bank savings account?
Government’s First Step Grant
Designed as part of the Child Development Account (CDA), the First Step Grant offers a generous $3,000 for children born on or after 24 March 2016, and an enhanced $5,000 for those born on or after 14 February 2023, deposited directly into your child’s CDA without any prerequisite savings from you.
This initial financial boost is pivotal, setting the stage for your child’s future by encouraging you to start saving early for your child’s educational and healthcare needs.
The First Step Grant, requiring no initial deposit from you, not only eases the financial burden on families but also underscores the government’s proactive approach to investing in the next generation’s well-being and development.
It’s a clear signal of support for family growth, aiming to alleviate some of the costs of raising children in Singapore, and ensuring every child has the resources they need for a bright start in life.
Government’s Matching Contributions
Here’s where the magic happens. For every dollar you deposit into the CDA, the government will match it, doubling your savings up to a specified cap.
This matching is tiered based on the order of your child’s birth.
Here’s a table to illustrate what you’ll receive for each of your children if they are born after 13 February 2023:
| Birth Order | Baby Bonus Cash Gift (Enhanced) | First Step Grant (Parents’ Savings Not Required) | Maximum Government Co-Matching | Total Government Contributions (Excluding Baby Bonus Cash Gift) | Total Government Contributions (Including Baby Bonus Cash Gift) |
|---|---|---|---|---|---|
| 1st Child | $11,000 | $5,000 | $4,000 | $9,000 | $20,000 |
| 2nd Child | $7,000 | $12,000 | $23,000 | ||
| 3rd Child | $13,000 | $9,000 | $14,000 | $27,000 | |
| 4th Child | $9,000 | $14,000 | $27,000 | ||
| 5th & Subsequent Child | $15,000 | $20,000 | $33,000 |
This is an improvement to what’s previously offered for children born before 14 February 2023, shown below for reference:
| Birth Order | Baby Bonus Cash Gift | First Step Grant (Parents’ Savings Not Required) | Maximum Government Co-Matching | Total Government Contributions (Excluding Baby Bonus Cash Gift) | Total Government Contributions (Including Baby Bonus Cash Gift) |
|---|---|---|---|---|---|
| 1st Child | $8,000 | $3,000 | $3,000 | $6,000 | $14,000 |
| 2nd Child | $6,000 | $9,000 | $17,000 | ||
| 3rd Child | $10,000 | $9,000 | $12,000 | $22,000 | |
| 4th Child | $9,000 | $12,000 | $22,000 | ||
| 5th & Subsequent Child | $15,000 | $18,000 | $28,000 |
Sounds good, right?
Well, it actually is, as long as you spend it at approved places.
What can I specifically use the Child Development Account funds for?
The Child Development Account (CDA) funds offer a versatile range of uses to support your child’s development from infancy through to their pre-teen years.
Here’s a handy list of what parents can utilise the CDA funds for:
- Childcare Centres and Preschools: Cover the fees for registered childcare centres and kindergartens, ensuring your child gets a head start in their education.
- Early Intervention Programmes: For children who require additional support, the CDA can be used for specialised early intervention programmes that cater to their developmental needs.
- Medical Expenses: Pay for your child’s medical expenses at healthcare institutions, including hospitals, clinics, and dental services, ensuring they receive the necessary healthcare without financial strain.
- Health Insurance: Use the funds to cover premiums for MediShield Life or MediSave-approved private integrated shield plans, providing your child with comprehensive health coverage. For now, only Great Eastern’s shield plan is approved for CDA usage, but there have been instances where reimbursements have been made for policies by other insurers. You’ll have to email [email protected] to find out more about this.
- Educational Materials: Purchase educational materials from approved institutions, supporting your child’s learning journey with the right resources.
- Enrichment Activities: Enrol your child in enrichment activities registered with the Ministry of Social and Family Development (MSF), from music classes to sports programmes, fostering their talents and interests.
- Optical Services: Eye care is crucial, especially with increasing screen time. Use the CDA for eye-related products and services at optical shops.
- Assistive Technology Devices: For children who need them, the CDA can be used to purchase assistive technology devices, supporting their learning and daily living.
- Pharmacy Purchases: Buy approved healthcare items at pharmacies, from vitamins to prescribed medications, ensuring your child’s health and well-being.
- Post-Secondary Education Account (PSEA): Any remaining funds in the CDA after your child turns 12 will be transferred to their PSEA, supporting their educational expenses in secondary school and beyond.
This list is not exhaustive but highlights the broad scope of expenses the CDA funds can cover, making it a valuable asset in managing the costs of raising a child in Singapore.
Here’s a list the Ministry of Social and Family Development (MSF) provides on what you can use the CDA for.
What can you not use the Child Development Account for?
While the Child Development Account (CDA) is a versatile tool in a Singaporean parent’s arsenal for covering a wide range of child-related expenses, there are certain things it cannot be used for.
Understanding these limitations helps ensure that you plan your finances effectively without expecting the CDA to cover:
- Personal Entertainment: Expenses related to personal entertainment, such as buying toys, video games, or tickets to amusement parks, cannot be paid for with CDA funds.
- Non-Educational Electronics: Purchasing non-educational electronics, such as smartphones, tablets (unless specifically required for educational purposes and approved), or personal computers, is not an approved use of CDA funds.
- Unregistered Activities: Activities and classes not registered with the Ministry of Social and Family Development (MSF) or not directly related to the child’s education or health, such as private holiday camps or unregistered hobby classes, cannot be financed with CDA funds.
- Daily Expenses: Routine daily expenses, including clothing, food, or transportation costs, are not covered by the CDA.
- Overseas Expenditures: While the CDA is generous, it’s designed to support services within Singapore. Expenses incurred for services or products overseas are not eligible for payment with CDA funds.
- Parental or Sibling Expenses: The CDA is child-focused, meaning it cannot be used for expenses directly related to parents or siblings, including parental health insurance, education, or activities.
- Non-Approved Medical Expenses: While a wide range of healthcare expenses is covered, certain medical costs outside of approved healthcare institutions or for treatments not recognised by the Ministry of Health may not be eligible for CDA funding.
- Investments: The CDA cannot be used for making investments, including purchasing stocks, bonds, or other financial instruments on behalf of the child.
By steering clear of these non-eligible expenses, parents can maximise the benefits of the CDA, ensuring it effectively supports Singaporean children’s developmental needs.
Can anyone sign up for the Child Development Account (CDA)?
At its core, the CDA is for children who are Singapore Citizens – so as long as you have a child who’s a Singaporean, they’re eligible and can sign up for the Child Development Account!
If your bundle of joy has just arrived or you’re welcoming a child into your family through adoption, you’re eligible to kickstart this financial journey, too!
But what about the parents? At least one parent must be a Singapore Citizen to open the account.
This inclusivity extends a warm welcome to a variety of family setups, from single parents to blended families.
How do I apply for the Child Development Account?
Applying for the Child Development Account (CDA) is like setting off on a quest to unlock a treasure chest for your little one’s future.
But fear not, this quest comes with a map – a step-by-step guide to navigate through the application process smoothly.
Step-by-Step Guide to Apply for the CDA
- Step 1: Eligibility Check First things first, ensure your bundle of joy is a Singapore Citizen – that’s your golden ticket. At least one parent must also be a Singapore Citizen too.
- Step 2: Gather Your Tools You’ll need your SingPass ready. It’s like the key to open many doors in Singapore, and the CDA application portal is one of them.
- Step 3: Choose Your Vessel Decide which bank you want to anchor your CDA with – DBS/POSB, OCBC, or UOB. Each has its perks, so pick the one that suits your family’s needs best.
- Step 4: Launch the Application Head over to the Baby Bonus Online website. Log in with your SingPass, and select ‘Apply for Child Development Account’. Make sure you’ve got all your documents and details ready.
- Step 5: Fill in the Details Complete the application form. This is where you chart your course, providing all the necessary information about you and your child.
- Step 6: Submit and Wait for the Magic Once you’ve double-checked all the details, hit submit. Typically, the account is up and running within 3-5 working days.
- Step 7: Start Contributing Once you’ve started contributing to your child’s account, it’s time to wait for the government’s dollar-matching contributions to start rolling in.
Which Bank Should I Use to Open the Child Development Account?
Choosing the right bank for opening a Child Development Account (CDA) is crucial as it can affect the benefits you receive.
While the government’s matching contributions remain the same regardless of the bank, the interest rates offered can vary, making some options more appealing depending on your financial goals for your child’s savings.
Here’s a comparison of the interest rates offered by the 3 banks authorised to hold CDA funds:
| Bank | Interest Rates |
|---|---|
| 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% |
| UOB | First $25,000 – 1.00%
Next $25,000 – 2.00% Above $50,000 – 0.05% |
When deciding which bank to open a CDA with, consider the interest rates and other factors such as the convenience of banking services, the proximity of branches, and any additional perks or benefits that come with the account.
Each bank may offer unique advantages, such as exclusive promotions or tie-ins with educational and healthcare providers, which could enhance the value of your CDA beyond just the interest earned.
It’s worth reviewing each bank’s offering in detail to determine which best aligns with your family’s needs and financial planning goals for your child’s future.
What happens to leftover funds when your child turns 13?
When your child sails past their 12th birthday, any treasure still sitting in their Child Development Account (CDA) doesn’t just vanish into thin air.
Instead, it embarks on a new journey, moving to their Post-Secondary Education Account (PSEA).
Think of it as the CDA growing up, transitioning from supporting your child’s early years to focusing on their educational voyage through secondary school and beyond.
You do no need to navigate any complicated paperwork or perform any financial acrobatics; the transfer is smooth and automatic.
Are Single/Unwed Parents Eligible for the Child Development Account?
There’s a common myth that single parents or unwed parents might not qualify for the CDA benefits.
Not true.
As long as the child is a Singapore Citizen, the doors to the CDA benefits are open.
For children born or adopted on or after 1 September 2016, unwed parents (only single mothers) can breathe a sigh of relief knowing they’re included.
However, they are not eligible for the Baby Bonus Cash Gift.
Are Adopted Children Eligible for the Child Development Account?
Yes, adopted children are eligible for the Child Development Account after the adoption process and if they are Singaporean children.
What is the interest rate on a CDA account?
The interest rate on a CDA account varies by bank but generally ranges between 1% to 2% for the first $50,000.
Can you change CDA bank to another bank?
Yes, you can change your CDA bank to any of the 3 banks – UOB, DBS, or OCBC – and your funds will be transferred to your new CDA account.
Can I withdraw money from the CDA account?
Withdrawals from the CDA account are permitted for approved child-related expenses.
When should I open a CDA account?
Parents should open a CDA account soon after the birth or adoption of their child to maximise government matching contributions.
How do I pay with CDA?
Payments with CDA can be made directly at approved institutions for healthcare, education, and other eligible services, using a linked bank card or account.
Here Are Some Tips To Maximise Your Child’s CDA Account
Our partner, Jordan, who has helped many parents with financial planning for their children, recommends that parents immediately open a Child Development Account as soon as they can to receive the First Step Grant.
This is because the First Step Grant is given to your child with no conditions. So even if you’re unable to utilise the government’s dollar for dollar-matching, at least secure this first.
You can use this for any approved expenses and even start earning interest on it first!
Claudia, another partner of ours, shares that you should also take note of the interest fees every 3 to 6 months across the different eligible banks and consider making switches to maximise your interest returns.
The interest rates might change, so changing banks can be beneficial for you. Just ensure you’re not doing it before any planned expenditure, as banks usually take between 3 to 4 weeks to transfer the funds over.
But in my opinion, I think if the interest rate difference is not too big, it might be worth considering the convenience of not switching and other banking conveniences your current bank may provide.
Conclusion
And there we have it, a whirlwind tour through the essentials of the Child Development Account (CDA) – from eligibility for adopted children to the nitty-gritty of interest rates, withdrawals, and the best time to open an account.
We’ve also touched on how to make payments directly from your CDA for those all-important child-related expenses.
Navigating the waters of financial planning for your little ones can sometimes feel like you’re charting unknown territories.
But with the CDA, you’ve got a sturdy vessel to help carry you and your child through the early years, ensuring they have all they need for a bright start in life.
Feeling a tad overwhelmed?
No worries, it’s a lot to take in!
If you’re finding yourself with more questions than answers or just need a bit of guidance on how to make the most of your CDA, we’re here to help.
Our financial advisor partners are on standby, ready to offer you a helping hand – and the best part?
It’s completely free.
So, don’t hesitate to reach out and get the support you need to navigate this journey with confidence.
