For first-time parents, I always recommend that they over-prepare and accomplish as many tasks as they possibly can before the birth of the child. The reason is simple- control as many known variables as possible because the newborn will always be the unknown variable. One of the easiest tasks that you can tick off your checklist is to decide on the best Child Development Account (‘CDA’) for your child. The good news is that this task has been made easier with my blogpost since I have to choose a CDA for my newborn. This is a review of the best CDA for your child under the 2023 Baby Bonus edition.
Compare Child Development Accounts (CDA)
For first-time parents who are unaware, CDA is only offered by the 3 local banks in Singapore (think of it as their form of national service to Singapore). Without further ado, Diagram 1 compares the interest rates and merchant perks offered by the 3 banks.
With reference to Diagram 1, you can immediately understand why this exercise took me less than 15 minutes. In terms of interest rate, which should be the key determining factor, OCBC clearly came out top.
- For the first $10,000, which is relatively easy to accomplish when the matching grants from the Singapore government are added in, OCBC already offers a higher tier than its competitors.
- Moving on to the next tier, OCBC also offers higher interest rate at 2.4%. Amazingly, OCBC makes this a no contest by not capping the maximum deposits in the CDA that can earn 2.4%.
I acknowledge that most parents would not consider topping up and depositing excessive sums in their children’s CDA due to the following reasons:
- Regulations in place on how you can use CDA funds at approved institutions, which also suggests that it cannot be withdrawn as cash
- Banks can vary the interest rates at their whims and fancies and they can do it even to existing CDA holders
Regardless, I truly appreciate this gesture from OCBC when its competitors are awarding just a measly 0.05% for deposits beyond $50,000. Having been a parent for over 4 years now, I understand how costly it can be to raise a child in Singapore. For instance, if a parent chooses to send the child only to private doctors and preschools, the said $50,000 may not even last more than 2 years.
For some, the 2nd comparison factor is the number of merchant partnerships signed up by the bank. Once again, OCBC stands out with the greatest number of merchant discounts. I don’t rate this factor at all because there are many other loyalty programmes offering similar perks. Moreover, there is already a laundry list of free samples that first-time parents can get their hands on.
Therefore, I came to the easy conclusion that I will be opening a child development account with OCBC this time round. Interestingly, this is a different outcome from the exercise I did in 2018 when I chose POSB Smiley CDA instead. Those were the halcyon days where a free infant ticket was amongst a host of benefits dangled as part of sign-up promotions. You can tell that I am completely brand agnostic here and simply plumped for the bank which offers the highest interest rate.
How To Open A CDA
I have to admit that I am definitely less zealous in all the preparation work this time round. I ended up applying for the CDA when the wife was 37 weeks old into her pregnancy. This is considered late by my standards when it can be done as early as 8 weeks before the estimated date of delivery. Thankfully, the application process is very straightforward and here is a step-by-step guide.
Step 1: Join the Baby Bonus Scheme and apply for a CDA via the Baby Bonus website
Step 2: Login with your Singpass and fill in your information. You need not provide the newborn’s birth date if he/she is still in mummy’s tummy. Just an estimated EDD is sufficient.
Step 3: Provide the bank account number that will receive the cash gift from government as part of Baby Bonus Scheme (more details in the next paragraph). Note that this is likely to be the parent’s own bank account number. It can also be different from the bank that you plan to open a CDA with.
Step 4: Choose the bank that you intend to open a CDA with by selecting from one of the drop-down options. Thereafter, you will receive confirmation from MSF that your submission has been captured. For those who are pre-registering such as me, the application will be processed once the child’s birth is registered with ICA as shown in Diagram 3.
Baby Bonus 2023
In Budget 2023, the government announced that the Baby Bonus Cash Gift will be increased to $11,000. This is cash that will be deposited into the bank account provided under Step 3 as aforementioned in the previous section. It will be disbursed regularly until the child turns 6.5 years old.
With respect to grants that will be deposited into the CDA that you have opened for your child, government will provide a First Step Grant of $5,000 upon account opening. It will also provide a co-matching grant ranging from $4,000 to $15,000 depending on the birth order of your child. For my case, since this will be 2nd child, the maximum government co-matching is capped at $7,000. Therefore, if you do the math, I can fund $7,000 into the CDA and end up with $19,000 ($5,000 as First Step Grant and another $7,000 as co-matching grant). I have every reason to quickly establish this position as the grants from government will be accruing interest from Day 1.
Finally, there is the Medisave Grant for newborns which is $4,000 deposited into the child’s MediSave account. The last time I checked my first child’s CPF balances, she already has a very healthy MediSave balance. This is because I grow my kid’s ang bao money by depositing them into her CPF MediSave. The 5% interest rate, guaranteed and risk-free, is a reasonable return relative to her young age.
That wraps up my comparison of the best CDA account and a quick summary of Baby Bonus Scheme 2023 edition. It was an easy decision to go with OCBC as it offers the highest interest rate amongst the 3 local banks. Glad to tick this task off my checklist to focus on other matters at hand! For those who will be upgrading their status to parents soon, here’s wishing you the best of luck during delivery, and hopefully this article has not taken longer than 15 mins. Finally, for those who are keen to switch their CDA account, you will be pleased to learn that it is possible to transfer from one CDA to another!
This article was published on 28 May 2023
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