Last Updated on May 31, 2022 by Parentology

What is CDA (Child Development Account)? Finally, it’s the next big step for you and your budding family. It’s time to welcome the newest member, a bundle of joy that brings out smiles from everyone. It’s just too hard to resist the kind of happiness you feel when you’re around a baby. Even our government is smiling with joy whenever there’s a newborn taking its first breath on Singaporean soil.

This is evident in the amount of support parents get in raising their children. Not only are the policies surrounding the rights of children pretty foolproof, but the financial assistance provided by the government is among the best in the world as well. One of the reasons, of course, is to encourage couples to take a chance at parenthood, therefore increasing the birthrate of the country.

One of the government initiatives that parents and their newborn enjoy is what we call the Baby Bonus cash gift. Amounting to S$8,000 that is payable over the course of 18 months, this fund is just among the many early privileges that a newborn enjoys. Another is the Child development account or CDA. This government mandated special account can be opened through one of these three local banks OCBC, UOB, or POSB. Upon opening this account, the child will receive the First Step Grant of S$3,000.

To be used for several approved purposes, this special account helps parents a lot in terms of protecting their child and the whole family from unexpected challenges. How can we maximise this?

CDA Dollar-for-dollar matching

Aside from the First Step Grant, your child is also eligible for the dollar-for-dollar scheme at a maximum of S$3,000 for the first and second child, S$9,000 for the third and fourth child, and S$15,000 for the fifth child and beyond. This means that the government will match whatever you top-up into your child’s account up to its assigned maximum amount. All you have to do is send over some funds to your child’s CDA and this is something you can do up until the last day of  the year of your child’s 12th birthday.

But it’s different for children born from August 17th 2008 to March 23rd 2016. This is because they have not received the initial S$3,000 granted to newborns. So it follows this scheme: for the first and second child, the maximum is S$6,000, for the third and fourth it’s S$12,000, for the fifth and beyond it’s S$18,000.

Should you max out the limits of this scheme?

Although it’s a great opportunity, there are different reasons why you should opt out of topping-up your child’s CDA. One is if you are not financially comfortable to do so. Take note that once you have deposited your money to a CDA, there’s no way for you to withdraw it for purposes other than the ones approved by the Ministry of Health. So if you think you are not ready to top-up, that’s fine. It’s ideal to top-up as early as possible to take advantage of the interest per annum but if there are more urgent financial considerations you must take into account, then it’s wiser to just do that.

MediSave and Integrated Shield Plan

It’s not new that parents would want to purchase an Integrated Shield Plan or IP for their child as this provides a more robust protection for them. And this is something that should be done as early as possible as well. If you are considering to get an IP for your newborn, you can pay for the premiums using your child’s CDA funds (from the dollar-for-dollar matching) or from their MediSave Account, which initially contains S$4,000 from the government upon opening. Take note that funds in the MediSave Account will generate an interest at 5% per annum, compared to the 2% in the CDA. But the former has more limited uses than the latter. So at the end of the day, it’s all about weighing your pros and cons.

Use CDA to pay for childcare and education needs

We are all too familiar with how helpful the CDA is when it comes to covering healthcare expenses. But did you know that you can also take care of childcare and education needs using these funds too? If it falls under the approved institutions, it’s better for you to top-up your child’s CDA then pay for these needs until you’ve maximised the benefits of the dollar-for-dollar matching.

Health supplements

Healthcare expenses you can cover using the CDA are not limited to hospitalisation or disease-related transactions. You can also use your child’s CDA to take care of their vitamins and supplements. Check out the Ministry of Health’s approved institutions and you will see that aside from these, you can also utilise CDA funds in optical needs.

What happens to the funds after your child turns 12 years old?

Of course you’re worried about where the money goes once your child turns 13 years old. But it’s a pretty secure arrangement. When that time comes, the whole balance will be transferred to your child’s Post-Secondary Education Account or PSEA. Furthermore, any untouched amount by the time they turn 30 years old will be transferred to the CPF Ordinary Account, which is what covers housing and other investments.

Maximising the benefits we get from the government makes total financial sense. This is what we advise to everyone: always try to look for areas where you can improve how you utilise your resources.