Why OCBC CDA (Child Development Account) is clearly the winner (for now)!

 

When baby Isaac was born, we looked into the offerings by OCBC, UOB and POSB for a CDA (Child development account). As he is our first child, we will be entitled to a $6,000 one-for-one matching to his CDA from MSF. Funds in this account can be used for a variety of expenses especially child care centre fees. Hence, we were quite comfortable putting in some money for him there.

Summary of the CDA from the 3 banks (Updated Feb2018)

OCBC CDA UOB CDA POSB CDA
Interest rate on CDA account 2% for the first $36,000. 0.05% for amounts in excess 2% interest with NO CAP 2% for first $12k. 0.05% for amounts in excess.

*For subsequent kids the cap is increased

Promotion Gifts Free $100 CDA contribution if buy a Great Eastern protection plan >$1,200/y or endowment plan >$3,600/y. Free $108 CDA contribution with purchase of Maxmaternity care 3% rebate on medical spend with POSB card + POSB CDA
Free baby books worth $47.40.
Kids (CASH) savings account “Mighty savers program” with CDA can get up to 0.8% interest. Must contribute minimum of $50/month with no withdrawal.
Promotional Period Till 31/12/2018 12/07/2018

 

We were sure that we wanted to tap on its strong interest rates and have budgeted $20k-$30k. OCBC will pay 2% for the first $36,000 which is more than most fixed deposits.

In my opinion, UOB’s offering of 2% interest with NO CAP is good but not of much use. There is little reason to put too large an amount into CDA because funds there cannot be freely withdrawn. Previously in 2015, UOB did a tiering system for interest and thankfully it has been revised.

POSB is offering 2% for only the first $12k. Previously, they had a guarantee on the 2% rate for 5 years but they seem to have removed it. (Do note that interest rates for CDA can change. For example in year 2011, Standard Chartered Bank had the best CDA interest rate offering at 1%/y only. Now it’s all at 2%).

I personally don’t quite value the promotional gifts.

*Do check with the banks directly on the promotion period validity.

 OCBC’s Mighty Savers Program makes the OCBC CDA a WINNER!

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Extra interest from the “Mighty savers program” is a monthly savings account and to get extra interest, it requires a minimum of $50/month deposited and an OCBC CDA for your child. OCBC offers an attractive interest rates of 0.8%/y with this setup. For our case, we have done an auto giro of $50 from mummy’s account every month.

UOB and POSB do not offer anything close for the child’s saving account.

For parents who are using the Standard Chartered Bank CDA, please note that support for existing accounts will stop on Dec2018 (link). You may consider switching to OCBC and there should be no charges.

If you are awaiting baby’s arrival, do read our wildly popular post on maternity insurance here!

 

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The Astute Parent

A parent who has a sharp acumen on sieving through 'alien' financial jargon to dish out bite size financial tips from a parent's perspective.

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