Child Development Account 101

For many people, having children is one of their greatest joys. That said, it’s worth noting that having a kid is not easy at all, especially considering today’s high cost of living. To help parents with the costs that come with having a baby, the Singapore government has the Child Development Account in place.

If you want to know how to use CDA account, its eligibility, and how it can help you, keep on reading.

Here at OMY Singapore, you will discover the following:

What Is A Child Development Account Or CDA Account?

The Child Development Account is mainly a savings account that can be used to pay for healthcare and educational expenses at approved institutions. It is included in the Baby Bonus Scheme by the Singapore government. As mentioned above, the CDA account was launched to help parents mitigate the high cost of raising children.

More From OMY: 5 Best Savings Accounts In Singapore With Highest Interest Rate

When a child is born, a CDA account is automatically opened for them. Parents can choose between various banks including POSB, UOB, or OCBC.

In the Budget 2016, the government also launched the CDA First Step Grant which aims to provide automatic contributions worth S$3,000. However, this has already been increased in Budget 2023.

Aside from that, the government will also match each dollar Dollar parents will contribute to the CDA account, up to a certain amount.

Take a look at the table below to find out more about the CDA account.

Birth Order CDA components for eligible Singapore children who are born from 14 Feb 2023 Total CDA Benefits
First Step Grant (Parents’ savings not required) Maximum Government co-matching
1st $5,000 $4,000 $9,000
2nd $7,000 $12,000
3rd & 4th $9,000 $14,000
5th and higher $15,000 $20,000

This new change was just announced on 14 February 2023, but it will start taking effect in early 2024. Eligible Singaporeans born from 14 February 2023 will still enjoy the current benefits, and parents will be notified if they can finally make additional deposits into their child’s CDA so they can enjoy the enhanced government co-matching.

How Can You Maximise The CDA Account?

Take a look at these tips below if you want to maximise your CDA account usage.

Contribute to the account and max out dollar-for-dollar matching

One of the best ways you can maximise your Child Development Account or CDA account is to contribute to the account since the government will match it on a dollar-for-dollar basis.

For the first child, CDA dollar to dollar matching will be capped at S$4,000 per child. For second-born children, it will be capped at S$7,000. Meanwhile, 3rd and 4th children’s CDA government matching will be capped at S$9,000, and all succeeding children’s dollar-for-dollar matching is capped at S$15,000.

This dollar-for-dollar matching will remain until the child turns 12 years old. Therefore, parents can contribute if they have extra funds throughout the years. There’s no need to rush depositing the funds for this account.

Use it to pay for your children’s education

Education in Singapore is not cheap. That said, you can take advantage of the CDA account to pay for a percentage of your child’s school fees. Just like paying for insurance, it’s better to top up your kid’s CDA to benefit from dollar-for-dollar matching. However, keep in mind that CDA can only be used at approved institutions.

Have a Medisave-approved plan

Parents are also advised to get a private integrated shield plan for children while they’re still young since children are less likely to have health issues and therefore can have full coverage without any exclusions.

Following this tip will also ensure that all future health conditions they might develop in the near future will be covered as long as their policy is still in effect.

Instead of spending cash or using your MediSave account to settle insurance premiums, you can use your kid’s CDA account. Thanks to CDA matching, you’ll only end up paying 50% of the premiums until the funds in your CDA run out.

Your kid will still receive a S$4,000 MediSave account from the government when you register their birth, and you can still use this account to pay for any integrated shield plan from a private provider.

If your child incurs other medical-related expenses, you may also pay this from your CDA account Singapore. If you already have hospitalization coverage for your kid, then you won’t need to worry about this. However, prepare to fork out money for other medical expenses like outpatient treatments, medicine, and even child vaccinations. These can be payable with your kid’s MediSave account.

Since we’re already talking about health, you can also use the CDA account to pay for everyday important items for your kid such as health supplements and vitamins, as well as contact lenses or spectacles at any approved institution or CDA approved pharmacy.

Choose your bank wisely

You can open your CDA Singapore in various banks, but if you want to ensure you make the most out of your money, carefully consider which bank you’re going with since different banks offer slightly different perks and interest rates.

That said, CDA account interest constantly changes, especially in today’s financial environment. Thankfully, you can easily exercise CDA account change bank. For instance, if you want to change from UOB CDA to OCBC CDA, all you need to do is apply to the MSF Baby Bonus website.

As of March 2023, here are the interest rates offered by banks:

UOB First $25,000: 1.00%
Next $25,000: 2.00%
Above $50,000: 0.05%
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%

A Word From OMY

Now that you know how to take advantage of CDA, you can finally plan your child’s future expenses better.

By now, you may be wondering what happens to unsused CDA. Keep in mind that all the money that wasn’t used for your kid’s CDA will be transferred to their Post-Secondary Education Account or PSEA, and you can use this for all activities related to post-secondary school.

More From OMY: Complete Guide to Understanding the Working Mother’s Child Relief (WMCR) (2023)

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