You will be able to plan CDA deposits that capture the government match within your budget.
Daniel's cousin opened a CDA for his son and never put a dollar in. "We're already stretched," he said, "and that money is locked up anyway." Both halves of that sentence were wrong in a way that cost him. The deposits he skipped would have been matched by the government, and the money could have paid the infant care fees he was already paying from his salary.
This lesson shows how to plan CDA deposits so you collect the match without adding strain to a budget that a new child has already squeezed.
Lesson 6.2, Baby Bonus, the CDA and other support, explained that the government matches your deposits into the Child Development Account dollar for dollar, up to a cap. Every dollar you deposit up to that cap becomes two dollars in the account.
There are few other places where a deposit is doubled the day you make it. That alone is a strong reason to plan the deposits rather than leave them to whatever is left at the end of the month. The match only applies to deposits made within a time limit, and only up to the cap for your child, so check both on the Baby Bonus pages of madeforfamilies.gov.sg. A deposit made after the limit gets nothing.
The cousin's worry was that money put into the CDA disappears until the child is grown. It doesn't. As lesson 6.2 described, the CDA can pay approved institutions directly for things such as infant care, childcare, kindergarten and medical bills.
That changes the arithmetic. If you are going to pay S$650 a month in childcare fees anyway, you can pay part of those fees from the CDA instead of from your salary. Depositing S$100 into the CDA and then spending it on childcare costs you nothing extra compared with paying the centre directly, but the government adds another S$100 to the account. In effect, the match reduces the cost of care you were going to pay for regardless.
So the real limit on CDA deposits is not whether you can afford to lock money away. It is timing: whether your deposits can stay ahead of the approved costs you want to pay from the account.
You could try to reach the cap in one large deposit in the first year. Some parents do, especially if they have savings set aside. For most, though, the first year is when the budget is tightest: one parent may be on unpaid leave, and the pre-birth costs from lesson 6.1, What a child costs in the first five years, have just been paid.
The easier route is to spread deposits over the years the match applies, aiming to reach the cap before the deadline. A steady monthly deposit set up as a standing transfer, the same way you automated your savings in The Singapore personal finance system lesson 2.3, Automate payday so saving happens first, means you don't have to remember.
Here is Mei and Daniel's plan, with a matching cap of S$4,000 that is made up for the example. Look up the real cap for your child.
They decide to reach the cap over four years, depositing S$1,000 a year. That is about S$83.33 a month, which they set up as a standing transfer on payday. The government matches each deposit, so S$1,000 a year from them becomes S$2,000 a year in the account, and S$4,000 from them becomes S$8,000 over the four years.
They use the account to pay part of the infant care and childcare fees each month. In year one, infant care costs S$4,200 for the six months after Mei returns to work, more than the S$2,000 that goes into the CDA that year. In each later year, childcare is S$7,800, far more than the CDA receives. So the account never builds up money it can't spend, and the S$4,000 of matching comes off their childcare bill over four years.
Had they planned to deposit only what was left at the end of each month, they would probably have deposited little in year one and caught up later, if at all. With the transfer set up, the match is collected without anyone needing to think about it.
If you deposit more than you spend, the balance stays in the CDA for the child's later approved costs. Unused CDA money doesn't vanish when the child grows older: under the current rules it moves to an education account for the child, which can be used for approved education costs later on. Check the age at which this happens and how the account can be used on the Baby Bonus pages, because the rules have been revised before.
This means overshooting slightly is not a disaster, though for most families the goal is a balance that is spent on care in the early years while the match is collected in full.
Your own schedule needs the current cap and time limit from the official site. Have them open before you start the activity.
Plan a yearly CDA deposit schedule that captures the match, using current figures from the Baby Bonus website.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).