You might have heard the terms “Baby Bonus” and “CDA” before but these probably meant little or nothing to you before you became a parent. Now, these are the buzzwords that you look for when considering childcare and preschools, enrichment centres and even for medical needs like clinic visits or eye checks.
If you already have a baby and still don’t recognise these words (highly unlikely), then buckle up! Trust us, when it comes to money and subsidies, you’d want to get familiar with all of these and more that’s available to you as a Singapore Citizen.
What is the Baby Bonus scheme?
Think of the Baby Bonus as our government’s big fat ang pow to you when baby is born. The reason they came up with is to encourage married couples in Singapore to have children and then possibly more children!
The scheme is made up of three parts. The first is a total sum of $8,000 in cash that will be deposited into your bank account once your baby officially registers his birth certificate. You will get the same amount for baby number two, and $10,000 each for babies three, four and so on. If you manage to get there, good on you Mumma!
Do note that the amount is not a lump sum; it will instead be disbursed to you in five installments over 18 months; possibly to help parents manage their finances responsibly.
The section part of the Baby Bonus is the Child Development Account, commonly referred to as CDA.
What is the CDA?
The CDA is a combination of a bank account and savings plan. The account is only offered by three banks here: DBS, OCBC and UOB. It’s best to pick a bank that you already have one or several accounts with, just to make life easier.
The beauty of the CDA is that it comes with dollar-for-dollar matching from the Government (up to several limits). And that’s not all; when you open the account, a $3,000 Step-up Grant will be deposited into the account.
From then onwards, you would need to deposit sums of money in order to benefit from the Government co-matching component. You can also deposit the Baby Bonus cash gift here. There are a few things to note. For your first child, the maximum co-matching amount is $3,000, so you will not benefit from co-matching beyond a deposit of $3,000. With your second child, the maximum co-matching amount is $6,000; with your third and fourth it’s $9,000 and with your fifth child and more (what’s your secret!?) it will be $15,000 per bub.
Note that while you can freely deposit as much cash into the CDA as with any other savings account, using the funds will be subject to CDA-approved institutions or organisations only. So, you can’t draw out cash with an ATM card or use your baby’s funds to buy a Hermes bag.
Not that you were thinking of doing that of course. No, family vacations to Disneyland with baby are not an endorsed CDA activity either.
The third part of the Baby Bonus scheme is what the government calls a Baby Bonus One Stop Service. To be honest, it’s not really a third benefit per se, rather it is a convenient way for you to opt into the scheme by signing up at one of the 10 hospitals that offer this service. You’d also be able to get information here about the Baby Bonus or check if you’re able to deduct funds from your CDA account for any pertinent bills such as a medical screening or similar.
HOW TO MAXIMISE BENEFIT FROM THE BABY BONUS AND CDA
As parents, one of the priorities we have is to save up for our kids’ future. At the same time, we are also concerned with the bills we have to pay in the care and keeping of our children. How do we manage both and how does the Baby Bonus and CDA factor into these decisions?
One important thing to note is that the CDA is only open for use until the child turns 12 years old. Any unused funds after that will be channelled into his Post-Secondary Education Account (PSEA). The funds left here may be used to offset tertiary school fees but are not eligible for other purchases that you might require in Secondary School (like schoolbooks or getting a new computer).
Thus, to make the most of your CDA benefits, you must complete depositing the maximum sum needed that will be co-matched by the government before your kid turns 12. In order to have the funds for use as quickly as possible, it also makes sense to deposit the maximum amount as early as you can, while your child needs CDA-approved services, like childcare. If cashflow is tight, you can consider depositing part of your Baby Bonus ready cash into the CDA.
The second important thing to note is that, because CDA funds cannot be withdrawn in cash, it would not be of any benefit to deposit more than the maximum co-matching amount. Instead, open another regular bank account as your rainy day or savings fund for junior and think of the CDA as your account to spend the free money that you’ve been given.
Because the CDA funds can only be used to pay CDA-approved vendors, do look out for them as you are considering your child’s needs through the weeks, months and years after birth. Suspect that Junior needs spectacles? Check the CDA website. Looking for a pre-school? Ask if they are a CDA-approved institution and can take fees deducted directly from your CDA account. Do also note that there are further grants that you may be eligible for that you can stack on to these benefits, such as the working mother’s subsidy for childcare and preschool fees.