Let’s talk about the Baby Bonus today and we will share how we intend to execute our Baby Bonus plan. For starters, you can find information on the Baby Bonus from the official website.
Let me summarize the whole Baby Bonus thing in a nutshell. There are 2 components, the cash gift and the child development account (CDA) dollar-for-dollar matching. For #1 and #2, the cash gift is $4000 total per child, paid in 4 installments of 6 months interval; CDA dollar-for-dollar matching is $6000 per child, paid 1 month after the parents deposit the cash. For #3 and #4, the cash gift is $6000 total per child, also in 4 installments of 6 months interval; CDA dollar-for-dollar matching is $12000 per child. And I doubt any Singapore family will have a #5, so let’s stop here.
Note, you will not get the Baby Bonus monies automatically. Instead, you have to fill up an application form and submit it to MCYS to start receiving the Baby Bonus. Luckily, the process is streamlined and can be done at any major delivery hospital, for our case it was TMC. We submitted our application during one of our return visits to TMC for postnatal checkup.
We received our first cash gift payout of $1000 from MCYS pretty quickly, around 2-3 weeks after submitting the forms. Next is the CDA component which was offered by 2 banks, Standard Chartered Bank (SCB) and OCBC. We decided to go with SCB for 2 reasons.
First, we are quite pleased with the customer service provided by SCB through our Manhattan Card. Second and more important reason, we wanted to make use of the Family Saver scheme which allows the parents to open an e$aver account and enjoy the same 1% p.a. interest as the CDA account. Compared this to the miserable 0.1% p.a. for DBS Savings Plus (or any other normal savings account with any banks) and you can see that the Family Saver e$aver account is really a fantastic savings account with high interest and is completely liquid. It will be a useful place where we can park our spare cash (and rainy day funds) to earn high interests without any constraints to withdrawal.
Back to the CDA account. For Baby1, the Baby Bonus will match up to $6000 dollar-for-dollar in the CDA account. There are a few ways to do this. We can deposit a lump sum of $6000 on day 1, or we can do a regular savings thing and deposit $100 per month over 60 months. Remember that the money in the CDA account can only be used at approved institutions so it may not be wise to input a large lump sum into this account especially if the parents are tight on cash after paying for baby and gynae related expenses over the past 40 weeks as well as the hospital delivery bills. Furthermore, a lump sum of $6000 could potentially yield higher returns if it is properly invested.
For us, we did something in between. We decided to channel the cash gift that we will be getting from MCYS towards the CDA account. That is, we will deposit $1000 into the CDA account on the 1st, 7th, 13th and 19th month immediately after we receive the cash gift component. That’s a total of $4000 in the CDA after 19 months, but we’re still short of $2000 to maximise the $6000 dollar-for-dollar matching. For that, we made a lump sum deposit of $2000 to the CDA account using the ang bao money we received from Baby1’s baby shower. And that’s our $6000 in the CDA account without straining our finances since all of it came from extraordinary sources. We made the initial deposit of $3000 (cash gift + baby shower ang bao) in March and have since received the dollar-for-dollar matching in April.
So let me summarize again how we utilized the Baby Bonus. All the cash gift of $4000 goes towards the CDA account. Further top-up the CDA with $2000 of ang bao money from baby shower to maximise the $6000 dollar-for-dollar matching. Sign up for the Family Saver s$aver account to enjoy the high interest rate of 1% pa with full liquidity. Hope this is useful information to fellow parents. =)
15 Dec 2012 Update: If you have 2 kids, you may want to consider opening one CDA account with StandChart and one CDA account with OCBC. This way, you can get the benefits from both bank. Remember, the CDA card is also eligible for some discounts and privileges with some retail stores. For us, we opened both with StandChart so that it’s easier to manage the accounts at a glance, and also because I didn’t think I will use the benefits from the OCBC CDA card.