Under the Baby Bonus scheme, the government matches the amount that you save in your child’s Child Development Account (CDA), dollar for dollar.
The matching contribution from the government is capped at $6,000 for your second child, and $12,000 for your third child. The amount is also $12,000 for your fourth child.
The CDA is sometimes also called Children Development Account.
To open the CDA account, you need to go to a POSB branch.
You can use the savings to pay for education and medical-related expenses for any of your children. See this for details.
See also my calculations on how much your children can get. (The total is a whopping $68k!)
When your child enters primary school, a Post-Secondary Education Account (PSE) will be created for your child. Unused savings in the CDA Account can * be transferred to the PSE Account.
The main purpose of the PSE Account is to help you save up for your child’s post-secondary education, i.e. for courses in ITEs, local polytechnics, JCs, and universities (including UniSIM).
Your contributions to the PSE Account will also be matched by the government, but subject to a combined CDA-PSE cap similar to the caps mentioned earlier: the government’s total co-funding for your second child, whether to CDA or PSE, will be capped at $6,000 (and $12,000 each for third child and fourth child).
The PSE Account will also earn the same interest rates as the CPF Special Account, which is currently set at 4%. (Straits Times, October 24, 2007)
* Parents have recently received letters saying that they have an option to withdraw the CDA savings when the child enters primary school.