The Baby Bonus Scheme, which was introduced on 1 April 2001, aims to support parents decision to have more babies by alleviating the financial costs of raising children. The scheme comprises two components – a cash gift and a Child Development Account (CDA).
As part of the Marriage and Parenthood Package 2013, the total cash gift for children born on or after 26 August 2012 has been increased and the payment schedule shortened.
Couples are given a cash gift of up to $6,000 each for their 1st and 2nd. This gift is paid out in 3 installments over 12 months from the child’s birth date, with the aim of helping parents defray early child rearing expenses.
The CDA is a special savings account that parents can open at any OCBC Bank or Standard Chartered Bank branch if their child meets the eligibility criteria. Over the child’s first 12 years, parents can pump in some savings to this account; these savings will be matched dollar-for-dollar up to the cap of $6,000 each for the first and second child, $12,000 each for the third and fourth child and $18,000 each for the fifth and subsequent child. The savings in the CDA may be used to pay certain expenses for children at a list of Ministry of Social and Family Development (MSF) approved institutions. The money can also be taken out to pay for MediShield or Medisave-approved private integrated plans for these children.
On paper, it looks very good indeed.
But in real life, some are not so enthusiastic about this government incentive to have more children, and express skepticism about its actual benefit to parents, citing various limitations outlined below.
- The scheme assumes responsible, financial savvy parents
The cash gift of $6000 may go a long way or last mere months, depending on the choices made by the child’s parents. Some may leave it in the bank for a rainy day. Others may draw out the money early on to get big ticket items for baby. There are those who may not even spend the money on the child per se, but on other family needs. And, some may, wisely or foolishly, choose to park the money in trust funds, investments or insurance policies. When in doubt, always speak to a professional and trusted financial advisor.
- CDA only covers a small percentage of a child’s total educational expenses
Typically, half a day of childcare (7am to 1pm) costs around $400 – $1,200 a month while full-day childcare (7am to 5:30pm) can set you back you about SGD 500-1,500. Even if your child stays home till kindergarten, most kindergartens will charge you $120 – $400 a month, which works out to about $1440 – $4800 in the first year alone! Suddenly, that $6-12K in the bank doesn’t seem so huge after all…
- CDA assumes that parents have sufficient capital to save in the first place
In order for the government to put money into your CDA, you need to have money in there first. However, not all families may be able to park a few thousand dollars into the account. Especially if you have elderly parents to support, housing loans to pay, and a lack of pre-existent savings to dip into.
- Money may not be what most parents need
Indeed, many of us do not choose to be parents if we don’t feel ready for it, especially financially. Of course, we’d all appreciate the extra cash, but what we’d really like is a little understanding and care, more time with our families, less late nights, and a lot more emotional support as new parents. Would you agree?
Nonetheless, while the Baby Bonus Scheme may indeed have its blind spots or shortfalls, there’s no denying that it has eased the financial strain of having bigger families.
As to whether or not the incentives are sufficient or appropriate for motivating couples to have more children – well, that remains a whole other topic to be explored.
By Dorothea Chow
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