Do you get confused with the Baby Bonus cash gift with the Child Development Account (CDA)? Joanne Lai, a Certified Financial Planner spells out the difference for us.
Cash Gift is a sum of money given to you by the government that does not require your contribution while the CDA is a matching contribution by the government for the amount that you save in the account.
Child Development Account
After you register your baby’s birth, you can open your child’s Child Development Account online with DBS, OCBC or UOB within 3 to 5 working days. You have up to 12 years to save in your child’s CDA and the government will match your savings within 2 weeks.
See also: Setting up a bank account for your child
How you can use your CDA
Most parents use the CDA for child care, kindergarten fees, and Medisave approved plans. It can also be used for special education schools, providers of early intervention programmes, providers of assistive technology devices, hospitals, clinics, pharmacies and optical shops. Most families will use up their CDA within 1 to 2 years, especially if they use it mainly for child care fees.
Summary of Baby Bonus
One major complaint of the cash gift is that it is barely sufficient to cover the costs and responsibilities of being a parent. Even though the amount offered may not cover all the costs involved, you can still make full use of the money to compound it to something meaningful.
To help first-time parents have a better idea of the costs involved, I designed a “First-Year Baby Costs Calculator“ which helps parents to understand one-time costs as well as possible ongoing costs.
By Joanne Lai, Certified Financial Planner
This was extracted from the second part of our E-book series: How To Raise A Money-Smart Child. You can read and download the full part here.