There are few people in Singapore who haven’t heard of the Baby Bonus. We all know that the government doles out money to people when they have babies. But how on earth do you actually get your hands on this money once you’ve brought new life into the world?
The answer is straightforward: you need to open a Child Development Account, otherwise known in acronym-crazy Singapore as a CDA account (yeah yeah, we know the “account” is repeated…). Read on to find out how exactly to open and use one.
Why do you need a CDA account?
A CDA account is a bank account that’s tied to your baby, not you. This is where the government deposits a portion of the money due to you as part of the Baby Bonus.
You will need to open a CDA Account when your child is born in order to receive #2 and #3 of the following Baby Bonus components:
(1) Cash Gift – Either $8,000 (for 1st and 2nd child) or $10,000 (3rd child onwards) will be paid out upon the birth of your child. This is paid into any bank account you wish, and not your CDA.
(2) Baby Bonus First Step Grant – Another $3,000 will be deposited into the CDA for all kids born on 24 March 2016 and later.
(3) Dollar-for-dollar matching of savings – The government will match each dollar you save in your CDA account. This means that when you deposit your first $3,000 into your CDA, the government will deposit another $3,000 to match it.
The government will only cough up maximum $3,000 each for your 1st and 2nd child, $9,000 each for the 3rd and 4th child and $15,000 for 5th and subsequent children.
In summary, this is how much you’d get from the government in Baby Bonus payout:
|Baby Bonus component
|Payout for 1st or 2nd child
|Payout for 3rd or 4th child
|Payout for 5th child onwards
|Cash Gift (any bank account)
|First Step Grant (CDA account)
|Dollar-for-dollar matching (CDA account)
BRB, off to make babies.
What can you use the money in your CDA account for?
Just like the money in your CPF account, the money in your child’s CDA can only be used for specific things. Once the cash goes in, it can only be used for educational and healthcare expenses for your child. So if you are wondering, can CDA money be withdrawn? The answer is no.
You can’t use CDA funds to pay for your kid’s “educational” iPad game purchases. You can only unlock the funds on the following, and only at Baby Bonus approved institutions:
- Childcare and kindergarten fees
- Special education school fees and early intervention programme fees
- School fees and school programme fees
- Medical bills (including vaccinations)
- Optical expenses
- Health supplements
- Insurance (for Medisave-approved Integrated Shield Plans)
- All of the above needs for siblings
Go to the Baby Bonus Approved Institutions portal to find out where you can use this money.
How to open a CDA account
You don’t have to go to a bank branch to open an account. All you have to do is log into the government’s Baby Bonus website, fill in an online form and indicate which bank you wish to open your account with.
Step 1: Log into the Baby Bonus website here using your SingPass. You can do this up to 2 months before your child is due.
Step 2: You’ll be prompted to fill in this online form. Fill in your particulars and click “Submit”.
Step 3: Wait to receive news that your application has been successful. The bank will send you information about your new account together with your new NETS card.
Now you’ve got a CDA account, what else can you do with it?
Other than making sure you use your CDA Account to pay for any expenses that qualify for CDA use, the following tips can help you get a bit more bang for your buck:
Compare accounts before choosing a bank
There are three banks where you can open a CDA account: POSB/DBS, OCBC and UOB. Each bank offers different perks and benefits to account holders, so compare the three and pick the one that you can profit from the most. All the CDA accounts offer 2% interest rates on your CDA savings.
POSB Smiley CDA offers you 3% cash rebate on local medical spending when you use the POSB Everyday Card or Passion POSB Debit Card. Account holders also get free baby books and various merchant discounts.
OCBC CDA offers 3% cashback for over-the-counter medical, dental and cord blood banking transactions when you spend at least $600 in a month on the OCBC 365 credit card. You also get discounts at various merchants.
The UOB CDA, meanwhile, doesn’t seem to have as many perks.
Max out your dollar-for-dollar matching
If you’re on your 1st or 2nd child, the government will match up to $3,000 worth of savings dollar-for-dollar. To get the maximum amount from the government, you’ll want to deposit the full sum of $3,000. But don’t be too hasty to deposit too much money, as once your cash goes in it’s trapped in the account.
Stop depositing money into your CDA once you’ve maxed out the dollar-for-dollar matching.
Once you’ve reached the maximum amount for the dollar-for-dollar matching offer, think about whether you want to continue saving to enjoy the 2% interest rate, or if you want to try and beat that with a low-risk investment vehicle like Singapore Savings Bonds.
Note that the POSB and OCBC accounts only offer the 2% interest rate up to the first $36,000 worth of savings (including money deposited by the government), after which any excess doesn’t do anything for you.
Do you have any questions about your CDA account? Leave them in the comments!