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Unlocking the Full Potential of Your Child Development Account (CDA) with These Clever Hacks
The Child Development Account (CDA) is a valuable resource for Singaporean parents, providing financial support for their children’s education and healthcare needs. But did you know that there are ways to maximize the benefits of your CDA? Discover these effective strategies that will help you make the most out of your CDA.
Introducing your little one to the world brings immense joy and happiness to any parent. And in Singapore, the government is right there with you, ready to support you on this incredible journey. With the country’s fertility rate at 1.05 (as of 2022), it’s clear that the government values the importance of each child.
To help ease the financial burdens of raising your child, the government provides a generous Baby Bonus cash gift of either $11,000 or $13,000, depending on your child’s birth order. This amount is disbursed over a span of 6.5 years, giving you a valuable boost in covering the costs of child-rearing.
But that’s not all. Your child is also entitled to a Child Development Account (CDA), which you can open with one of the local banks—OCBC, DBS/POSB, or UOB. The CDA serves as a savings account where you can set aside funds for your child’s future needs, and it remains accessible until your child reaches the age of 12.
The government understands the significance of early financial support, which is why they introduced the CDA First Step Grant in Budget 2016. Initially set at $3,000, this grant has now been increased to $5,000 as of Budget 2023 for children born on or after 14 February 2023. This additional contribution gives your child’s CDA an even stronger foundation for their future.
With your child’s CDA in place, you have the opportunity to manage the funds wisely, ensuring that they are used for your child’s benefit as they grow. By making informed decisions and seeking professional advice, you can maximize the potential of the CDA and provide your child with a strong financial start in life.
Optimize Dollar-for-Dollar Matching
Make the most of the government’s dollar-for-dollar matching by maximizing your personal contributions to the CDA within the matching cap.
The government’s commitment to supporting your child’s future extends beyond the initial grants. In addition to the CDA First Step Grant, there is a dollar-for-dollar matching scheme that enhances the benefits of the Child Development Account (CDA).
For the first child, the government matches savings in the CDA up to a cap of $3,000 per child. With the initial CDA First Step Grant of $3,000, the total CDA benefits can reach up to $6,000. For children born on or after 14 February 2023, the matching is capped at $4,000 per child, resulting in a total CDA benefit of up to $9,000 inclusive of the initial grant.
For the second child, the dollar-for-dollar matching is capped at $6,000 per child, with a total CDA benefit of up to $9,000 including the initial grant. For children born on or after 14 February 2023, the matching is capped at $7,000 per child, increasing the total CDA benefit to up to $12,000.
From the third child onwards, the dollar-for-dollar matching is capped at $9,000 per child, leading to a total CDA benefit of up to $12,000 inclusive of the initial grant. For children born on or after 14 February 2023, the matching remains at $9,000 per child, allowing for a total CDA benefit of up to $14,000.
For families with a fifth child or more, the dollar-for-dollar matching is capped at $15,000 per child. This brings the total CDA benefit to up to $18,000 inclusive of the initial grant. For children born on or after 14 February 2023, the matching is also capped at $15,000 per child, resulting in a total CDA benefit of up to $20,000.
These generous matching schemes provide significant financial support and opportunities for your child’s development and future. Take advantage of the CDA benefits and secure a solid foundation for your child’s journey ahead.
For Children Born On & After 14 February 2023
|
Birth order |
CDA | |||
| CDA First Step Grant
(A) |
Maximum Government
co-matching (B) |
Total Government contributions (A+B) |
Total amount in CDA, including parents’ contributions to maximise co-matching |
|
|
1st |
$5,000
(+$2,000) |
$4,000
(+$1,000) |
$9,000
(+$3,000) |
$13,000
(+$4,000) |
|
2nd
|
$7,000
(+$1,000) |
$12,000
(+$3,000) |
$19,000
(+$4,000) |
|
| 3rd and 4th | $9,000 | $14,000
(+$2,000) |
$23,000 (+$2,000) |
|
| 5th and higher |
$15,000 |
$20,000
(+$2,000) |
$35,000 (+$2,000) |
|
*The figures in bold reflect post-enhancement amounts, with changes from current quantum indicated in parentheses.
Source: Made for families
The dollar-for-dollar matching for the child’s CDA continues until the child reaches the age of 12. This means that parents can make regular contributions whenever needed and have the government match those funds. It is not necessary to deposit the entire amount at once to receive the full dollar-for-dollar matching, although there may be financial advantages to doing so.
It is important to note that Singapore Citizen children born between 17 August 2008 and 23 March 2016 receive a higher dollar-for-dollar matching from the government by an additional $3,000. This is because children born before 23 March 2016 do not benefit from the initial $3,000 CDA First Step Grant.
You can visit the Baby Bonus website to track the amount you have contributed to your child’s CDA. This will help you avoid overcontributing beyond the amount eligible for dollar-to-dollar matching, ensuring you maximize the benefits provided.
By leveraging the dollar-for-dollar matching scheme and managing your contributions wisely, you can optimize the financial support available through the CDA and provide your child with a strong foundation for their future.
Also, check out: Tips for Maximizing the Baby Bonus Cash Gift
Are you looking for ways to make the most of the Baby Bonus Cash Gift? We’ve got you covered! Here are some valuable insights on how young parents can maximize this financial benefit while providing for their little ones.
Choose the Right Bank
Select a bank for your CDA that offers competitive interest rates, convenient accessibility, and additional benefits that align with your family’s financial goals.
You have the option to open a Child Development Account (CDA) with one of the three local banks: OCBC, DBS/POSB, or UOB. The process is simple and can be completed online or through the LifeSG app. When you open the account, the government will provide an initial First Step Grant of either $3,000 (for those born after 23 March 2016) or $5,000 (for children born on and after 14 February 2023).
While the basic functionality of the CDA remains the same across all three banks, each bank offers unique benefits to their account holders. For instance, OCBC and DBS/POSB have partnered with selected merchants, providing exclusive discounts or perks that can be enjoyed by CDA holders. These additional benefits add value to the CDA and can be advantageous for young parents seeking cost-saving opportunities.
It’s important to note that the interest rates and merchant partnerships associated with the Child Development Account (CDA) may vary and are subject to change over time. Therefore, it’s advisable not to be surprised if there are adjustments to the benefits provided by the banks.
The good news is that if you find yourself dissatisfied with your current CDA bank, you have the option to request a bank change. You can do this by submitting an application through the MSF Baby Bonus website. This allows you to explore alternative options that may better suit your needs and preferences.
Consider selecting a bank for your CDA that you already have an existing internet banking relationship with. This offers the advantage of convenience as you can access and monitor your CDA using the same internet banking login. This means you won’t need to apply for another internet banking login specifically for accessing the CDA, simplifying the management of your accounts.
Consider Paying for a MediSave-Approved Integrated Shield Plan
We highly recommend that parents consider purchasing a private integrated shield plan for their children at a young age. This is because, during their early years, children are less likely to have pre-existing health conditions, making them eligible for full coverage with no exclusions.
By opting for a private integrated shield plan, you ensure that any future health conditions that may arise will continue to be covered by the insurance company as long as the policy remains active.
Instead of using cash or your Medisave account to pay for the insurance premiums, an alternative option is to utilize your child’s CDA account for payment. Thanks to the dollar-for-dollar matching provided by the government, you technically end up paying only 50% of the premiums—until the CDA funds are depleted. However, it’s important to note that not all insurers accept CDA payment.
To clarify, upon birth registration, your child automatically receives a Medisave Account with $4,000 from the government. You can also utilize the funds in the Medisave account to pay for the private integrated shield plan.
It’s worth considering that the Medisave Account earns an interest of 5% per annum (as long as the balance is below $60,000), while the CDA only earns up to 2%. However, it’s important to weigh the financial benefits against the limited usage of MediSave funds compared to the broader range of expenses that can be covered by the CDA. We’ll leave it to you to consider which option makes more financial sense.
Also, check out:
Understand Approved Institutions & Familiarize yourself with the list of Approved Institutions
Where you can utilize your CDA funds for educational and healthcare expenses.
Consider these Smart Tips for Managing Child Development Account (CDA) Funds:
Preschool Expenses
Preschool education in Singapore can be costly, but parents can utilize funds from the Child Development Account (CDA) to help offset part of the school fees. Topping up the CDA and taking advantage of the government’s dollar-for-dollar matching can provide financial benefits, especially considering the quick depletion of funds due to high school fees. Remember, CDA funds are only usable at approved institutions.
Since most preschools accept limited payment methods that don’t offer perks, it may be more advantageous to use CDA funds for preschool education and utilize credit cards for other child-related expenses to earn cashback or miles.
Child Medical Expenses
Child-related medical expenses, such as vaccinations, outpatient treatments, and pharmacy costs, can also be paid using the Child Development Account (CDA). If you have comprehensive hospitalization coverage for your child, you won’t need to worry about those expenses. However, it’s important to consider whether to use the CDA or the child’s Medisave Account, keeping in mind that the Medisave Account earns higher interest.
Most hospitals, polyclinics, and child specialist private clinics accept CDA payments. Make sure to bring your child’s CDA ATM card when visiting these facilities.
Vitamins, Health Supplements, and Optical Appliances
Apart from insurance, education, and medical expenses, CDA funds can also be used to purchase everyday items like vitamins, health supplements, spectacles, and contact lenses at approved institutions. However, keep in mind that you can generally use credit cards to pay for these items, so it might be more beneficial to reserve CDA savings for child-related expenses where credit card payments are not accepted, such as preschool education.
Prioritize using CDA savings for expenses that don’t accept credit cards to maximize the benefits, such as earning cashback and miles.
Cordlife
Cordlife offers cord blood and cord lining storage services, providing a potential source of stem cells for future medical needs. If you decide to sign up for Cordlife packages, you can consider using your child’s CDA to pay for the initial one-time fee and subsequent annual fees until your child turns 12. Additionally, you can also use CDA funds to cover the cord blood banking service for your child’s sibling.
Cordlife packages can be considered a significant investment. Depending on your miles/cashback strategies, you may want to consider using credit cards for payment. Alternatively, you can split the bill payment, partially using a credit card and the remainder from your child’s CDA.
What Happens To Unused Funds After The Age of 12
If you find that you haven’t utilized all the funds in your child’s Child Development Account (CDA) by the time they reach 13 years old, there’s no need to worry. The remaining balance will automatically be transferred to your child’s Post-Secondary Education Account (PSEA). This ensures that the funds can still be put to good use for their education in the future.
It’s wise to consider topping up your child’s CDA as early as possible, as you can earn a 2% p.a. interest on the account, including the government’s top-up. This way, you can maximize the benefits and potential growth of the funds over time.
You may be interested
When it comes to protecting your children’s future, having the right insurance coverage is crucial. Here are some essential types of insurance that you should consider for your children:
- Life Insurance: Life insurance provides a financial safety net for your children in the unfortunate event of your or your spouse’s passing. It offers a lump sum payment that can be used to support their needs and future expenses.
- Health Insurance: Comprehensive health insurance ensures that your children have access to quality healthcare services. It covers medical expenses, including hospitalization, outpatient treatments, vaccinations, and the cost of medications.
- Personal Accident Insurance: This insurance type provides coverage for accidental injuries and disabilities. It can help cover medical expenses, rehabilitation costs, and provide financial support in case of permanent disabilities.
- Education Insurance: Education insurance helps fund your children’s education expenses, including tuition fees, textbooks, and other educational needs. It ensures that they have the financial resources to pursue their academic goals.
- Critical Illness Insurance: Critical illness insurance provides a lump sum payment if your child is diagnosed with a critical illness covered by the policy. The funds can be used to cover medical expenses and provide financial support during the recovery period.
Remember, each family’s insurance needs may vary, so it’s essential to assess your specific requirements and consult with an insurance advisor to determine the most suitable coverage for your children.
Are you a young parent eager to secure a prosperous future for your family?
By implementing these smart strategies, you can enhance the value of your Child Development Account and give your child the best possible financial support for their development. Don’t miss out on these valuable hacks to maximize your CDA!
Take charge of your financial well-being and provide a stable foundation for your children’s dreams. Our team of expert financial advisors specializes in tailoring comprehensive financial plans for young parents like you. Whether it’s creating a college fund, saving for your children’s future, or building a solid retirement strategy, we are here to guide you every step of the way.
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