Last Updated on February 24, 2024 by Parentology

CDA: What Happens After 12 Years Old?

If you’re a parent in Singapore, you might already be familiar with the Child Development Account (CDA) scheme. It’s a special savings account that can be opened within 3 to 5 working days of your child’s birth registration or after completing the online form, whichever comes later. In Singapore, there are three CDA account options available: POSB Smiley CDA, OCBC CDA, and UOB CDA. In this article, we will explore where you can utilize the CDA funds and what happens to the money as your child grows up.

The CDA offers a saving period of 12 years, allowing you ample time to contribute to this dedicated account. To further support your savings, the government matches the amount you save in the CDA after the first 2 weeks, up to a maximum limit depending on the birth order. Additionally, under the enhanced Baby Bonus scheme, babies born from 14th February 2023 onwards will be eligible for the First Step Grant and CDA co-matching contributions, which can amount to up to $5,000. The specific details regarding government matching and the First Step Grant can be found on the Made for Families website.

What happens to the CDA once your child reaches 12 years of age?

Although the CDA functions as a savings account, it’s important to note that you cannot directly withdraw funds from it whenever you need them for your child. So, what occurs if there are remaining funds in the account that have not been utilized at Baby Bonus Approved Institutions by the time your child turns 12?

In such cases, any unutilized funds will be automatically transferred to the Post-Secondary Education Account (PSEA). The PSEA forms a part of the Post-Secondary Education Scheme, designed to assist in financing the post-secondary education of Singaporean students. The funds in the PSEA can be used by the account holder to finance their own educational pursuits. Alternatively, parents can apply to use the funds for their siblings’ approved programs at approved educational institutions. Additionally, the remaining funds in the PSEA can be utilized to repay government education loans and financial schemes. To find out which institutes accept PSEA funds, you can refer to the Ministry of Education’s website for more information.

Is it possible to close the CDA account and withdraw the funds within?

No, closing the CDA account and withdrawing the funds is not permitted. As mentioned earlier, the funds in the CDA are intended for use at Baby Bonus-approved institutions for the benefit of your child. Therefore, it is crucial to verify if the childcare facility or institute accepts payment from the CDA account before enrolling your child.

Now, let’s address the question of whether the CDA is a savings account that accrues interest. Yes, the three local banks (POSB, OCBC, and UOB) offer CDA accounts that typically provide an interest rate of 2%. However, it’s important to note that each bank may have slight variations in their CDA savings schemes.

For example, POSB Smiley CDA offers additional benefits such as the POSB Smiley Nets Card, which grants parents exclusive deals at kid-friendly establishments like MindChamps Preschool, as well as special massage deals for postpartum moms. Additionally, POSB provides a bundled savings account reserved specifically for the CDA. Currently, POSB offers 2% interest per annum for balances up to $50,000.

UOB offers a similar scheme with no cap on the amount eligible for 2% interest per annum. On the other hand, OCBC implements a step-up interest structure, where you earn 1.2% per annum on the first S$10,000 saved in your child’s CDA, and 2.4% per annum for amounts above S$10,000. OCBC also provides a benefits card that offers up to a 50% discount at selected merchants.

Ultimately, regardless of the account you choose, it’s crucial to understand that you cannot withdraw the funds from the CDA or close the account. The money remains in the CDA until your child reaches the age of 12. Additionally, it’s essential to verify if the desired institute accepts CDA funds before enrolling your child in any program.

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