As a result of the higher standards of living in Singapore, many married couples in Singapore are either pro-longing their family plans or scrapping it totally. On a positive note, for those who are looking to have children, or are already expecting one along the way, the baby bonus given by our government is a handy gift that can go a long way in offsetting costs for both parents and children.
In this article, we are not going to touch on the nitty-gritty of how baby bonus works and who are eligible. If you want to know the basic details, you can read more about them here.
Instead, we will go in-depth on how parents can fully maximise the baby bonus incentive that will be given by the Singapore Government.
Leverage on the Government
In the push for more babies, the government has been offering a scheme where they will match dollar-for-dollar the amount saved in the Child Development Account (CDA) up to $6,000 for each of the first two child. In addition, parents with children born on or after 26 August 2012 will receive a $6,000 cash gift.
By simple transferring the entire $6,000 cash gift to the CDA, you can effectively double the money that you and your child get from the government to $12,000.
Do note that the cash gifts and maximum amount of contribution provided by the government differs for those with a 3rd or 4th child. The cash gifts awarded increases to $8,000 and the maximum contribution by the government is propped up to $12,000. A parent who transfers the entire $8,000 to the CDA will receive a total of $16,000 after the government matches it dollar-for-dollar. To fully maximise the government grant, the parents should put in another $4,000 to earn the additional $4,000 thus accumulating a total of $24,000.
Utilizing the funds wisely
With a cash hoard available in the CDA account, parents can waive off some baby expenses through a Baby Bonus NETS Card issued by a bank when the account is set up. CDA saving funds can be used for child development needs at Approved Institutions registered with the Ministry of Social and Family Development (MSF). Approved uses of CDA funds include the following:
- Fees for child care centres, kindergartens, special education schools and early intervention programmes
- Medical expenses at healthcare institutions such as hospitals and GP clinics
- Premiums for Medishield or Medisave-approved private integrated plans
- Assistive devices
- Eye-related products and services at optical shops
- Approved healthcare items at pharmacies
In our opinion, the funds are optimized when they can help to defray costs from the childcare centres. For families considering infant/child care, it is imperative to know that the costs can be rather taxing, ranging from a few hundred dollars to more than a thousand per month. Using the funds to pay for health insurances for your child would also be a great use of the money.
On a side note, many aren’t aware that there are merchant discounts available when you are paying via the baby bonus card. One good example is the attractive discount packages from Neo Group you can capitalize on if you are doing a Baby’s full month celebration. You can find out more about such discounts here.
Taking advantage of higher interest rates
Even if you don’t intend to use the money in the CDA for any of the approved activities, simply leaving it in the account isn’t that bad of an idea either.
If parents are just looking for a savings account with a higher interest rate, turning to the CDA account actually make some sense. For example, OCBC will offer an interest rate of 2 per cent per annum with balances of up to S$36,000. Balance above $36,000 will earn the nominal interest rate of 0.05 per cent per annum.
POSB is paying an annual interest rate of 2 per cent for a family’s first and second child for up to S$12,000. For the third or fourth child, the rate will apply for balances up to S$24,000. Last but not least, UOB is offering interest rates of up to 2 per cent, which includes a 1.2% promotional bonus interest until 31 Dec 2015.
In a nutshell, you can (if you want to) earn $720 a year (or $60 per month) for a sum of $36,000 in your OCBC CDA account. Even if first-time parents are not willing to put in additional money to hit the $36,000 threshold, you can still look forward to a $240 interest income a year based on the $12,000 which the government is just going to give you anyway, which might be just enough to cover the injections and visits that you will be taking to the polyclinics!
Photo From Benjamin Lim