Last Updated on August 29, 2022 by Parentology
First published in TreeofWealth.sg
Congratulations on your new little bundle of joy! As a parent, you’re embarking on a wonderful childrearing journey that will change your life in unimaginable ways.
But before you can even think about all the amazing things to come, there are some important things to consider— such as how much it’s going to cost to raise your newborn.
It’s no secret that bringing a baby into the world is expensive. There are many costs that pop up unexpectedly, such as diapers, daycare, and doctor visits. But did you know that your child’s Central Provident Fund (CPF) can help defray these expenses? That’s right! Every Singaporean newborn born after 26 August 2012 has a CPF account that is automatically opened for them.
CPF for Newborns
CPF MediSave Account (MA)
|Date of Birth||Is the CPF MediSave Account opened?
|CPF MediSave Grant Amount|
|Before 26 August 2012
|Between 26 August 2012
& 31 December 2014
|On & after 1 January 2015
Your child’s MA works the same as adults, earning up to 4%* interest per year.
The savings inside MA can be used to pay for vaccinations under the National Childhood Immunisation Programme. Your child’s healthcare insurance premiums such as MediShield Life or private Integrated Shield Plans can also be paid using MediSave, subject to Additional Withdrawal Limits.
Lastly, the money can cover medical expenses incurred from hospitalisations, approved day surgeries, and selected outpatient treatments as well.
CPF Ordinary Account (OA)
Meanwhile, your newborn’s CPF Ordinary Account (OA) is reserved for his education, housing, and investments. These OA savings earn up to 3.5%* interest per year.
Any unused funds of your child’s Child Development Account (CDA) will be transferred to his Post-Secondary School Account (PSEA). When your child turns 31 years old, the unspent balance in his PSEA will then be transferred to his CPF OA.
CPF Special Account (SA)
Your child’s CPF Special Account (SA) is for investments and to tide him through his old age. Amongst the three accounts, the SA earns the highest interest of up to 5%* interest per year.
Checking Your Newborn’s CPF Account
- Log in with your SingPass on the CPF website. Go to “my cpf”, “My dashboards”, and click on “Child”.
- Select the name of your child.
- Make a declaration that you’re the parent/legal guardian of the child and you will inform the CPF Board if there is a change in the legal guardian relationship.
- View your child’s current CPF account balances. You can see the latest transactions, claims, and healthcare payments in the last 15 months.
Topping Up Your Newborn’s CPF Account
Making voluntary contributions to your little one’s CPF account can help jumpstart his savings and give him a head start in preparing for his future. As your child cannot touch and squander away his CPF monies easily, it also does not remove the incentive for him to work hard for his own living.
While many may think it’s the parents’ responsibility to help their children financially, grandparents can consider chipping in too.
Which CPF Account to Top Up For My Newborn?
Similar to our own CPF accounts, you can choose to top up either your little one’s MA, SA, or all three accounts. Do note, however, there is no tax relief for parents who perform cash top-ups to their newborn’s CPF accounts.
For parents who want the most flexible usage of the CPF funds, the best account to top up for your newborn would be his MA. At his age, this account offers the most flexibility, such as paying for vaccinations and insurance premiums. Also, any additional amount above the Basic Healthcare Sum will flow into his SA, giving your child a head start in saving for retirement.
For parents who wish to maximise the CPF accounts, consider topping up the SA which has the highest interest of up to 5%* per year. The earlier you top up your child’s SA and the larger the amount, the fewer the years to reach S$1 million when he turns 65 years old in future. For example, contribute S$64,350 for your baby at birth into his CPF SA and the amount will be compounded to make your child a millionaire 65 years later. However, the biggest risks of contributing such a large amount are policy or political changes as well as illiquidity of the SA.
For parents who are undecided, consider topping up all three accounts at the same time. This is still great as compared to simply keeping cash in the bank to earn meagre interest. The funds will be allocated as such:
- 6217 (~62%) to the Ordinary Account
- 1621 (~16%) to the Special Account
- 2162 (~22%) to the MediSave Account
Whichever account(s) you ultimately choose to contribute to, here are the steps on how to make a deposit to your newborn’s CPF accounts.
Steps to Top Up Your Newborn’s CPF Accounts
- Go to CPF’s e-Cashier page.
- Under the Payer’s CPF Account Number/NRIC, input your child’s NRIC number.
- Decide which top-up you’d like to make: MA, SA, or all three accounts.
- Choose the type of top-up you are making.
- Indicate the amount you wish to top-up.
- Make payment through the various modes of payment available.
Give Your Child a Head Start in Life By Topping Up His CPF Accounts
As a new parent, you would want to do everything you can to give your child a bright future. As such, it’s never too early to start thinking about financial planning. Though it may seem like a daunting task and a far-off goal, making small, regular top-ups to your child’s CPF accounts still goes a long way because the earlier you start, the better.
*The first $60,000 of the combined CPF balances, of which up to $20,000 comes from the OA, earns an additional 1% interest per year.