Is Topping Up To Your Child’s CPF and Medisave a good idea? Edition 2022

It's a common question: "What to do with spare cash" or "What to do with "Hong Bao" or "Green Packet" money given to your child"?

Where would be a good place to park it?

Today I'd be sharing with you the three methods to topping Up To Your Child’s CPF and some insights to it!

Method 1: Topping Up To Your Child's CPFSA Via RSTU (Retirement sum topping-up scheme)

Usually the RSTU scheme is tapped to save for your own retirement and get relief of up to $8,000.

It is possible to do RSTU for your child also (BUT NOTE NO TAX RELIEF TO YOU IN THIS INSTANCE!).

Interest earned to your child's CPFSA would likely be 5%p.a.* (factoring 1% extra)

*Do note that the extra interest applies only if total accounts are less that $60,000

More crucially, CPFSA is only for his/her retirement!

In addition, RSTU amounts will form part of the "AMOUNT RESERVED" that cannot be tapped during CPFSA shielding. Below is a screenshot of mine and that's why method 3 may be superior.

If you would like this method still, look for CASH TOP-UPS and choose "MY LOVED ONED"

Method 2: Topping Up Directly To Your Child's Medisave

You can top up directly to medisave which can be used for medical needs and private integrated shield plan premiums.  Link to CPF E-cashier here.

In future, your child can even use his/her medisave to pay your hospital bills. #touchwood.

The interest earned in your child's medisave would likely be 5%p.a.* (factoring 1% extra)

*Do note that the extra interest applies only if total accounts are less that $60,000 and all extra interest actually goes to CPFSA.

If you are keen, there are caps to take note of which is the Annual CPF Contribution Limit which is $37,740 and the Basic healthcare sum (BHS) on the medisave account which is $66,000.

To read more on IRAS deductions for individuals (reliefs, expenses and donations)

Method 3: Topping Up To Your Child's CPF Via Voluntary Cash Contribution (VC)

You can use the VC to top up. Link to CPF E-cashier here.

Funds deposited will be broken down to CPFOA, CPFSA and Medisave respectively.

The interest given to your child (assuming less than $60,000 and factoring a 1% extra*) would be 3.5%, 5% and 5% respectively.

*Do note that the extra interest applies only if total accounts are less that $60,000 and all extra interest actually goes to CPFSA.

With the allocation amount at 23%, 6% and 8%, the effective interest is about 4.07%p.a.

If you are keen, there is a cap to take note of which is the Annual CPF Contribution Limit which is $37,740.

However, if you really want more interest, you may transfer the OA to SA but that will also mean the OA amount cannot be used for your child's future home needs. The CPFOA accumulated there can only be for his/her future housing or local university studies under CPF Education Scheme.

Steps to top up to child's medisave or Voluntary contribution to child all 3 account

1) Go to CPF website - GROWING YOUR SAVINGS - e-Cashier.

2) Fill in your child's NRIC and then select “Member”

3) Choose whichever method you prefer from the drop down box.

- Contribute to my three CPF accounts (non-tax deductible)

- Contribute to my medisave (tax deductible)

4) Click "Next" and make payment

In future, you can check your CHILD"S CPF ONLINE. Read post 

HOW TO CHECK CHILD CPF MEDISAVE ONLINE! Teach compounding interest!

Quick comparison of the three methods above + CDA account

There are no tax relief's that you can get with all three methods. CPF FAQ here

When you top up, there is a small consequence in future which is your child loses the opportunity to top up themselves for their own tax relief in future if their cap is met then.

Conclusions on why I chose to NOT top up to child's CPF and Medisave.

Your child may need liquidity at some stage in future and all 3 methods destroy liquidity.

These include cash needed for house purchase or even pay school fees. etc and VC to CPF and medisave are illiquid. Contributions in cannot be taken out.

Funds in CPFOA can be used for your child's home purchase some 20years later only. CPFSA is really for his/her retirement which is worse. It's like depositing and saying goodbye for the next 50years or so which is something so far down the road.

The main question is, do you REALLY need to take care of your child's retirement?

I've decided to put some extra savings into my child's CDA account instead of my child's CPF or medisave. 

This is despite the lower interest.

At least funds will be used in the next few years for school fees.

If your child is above the age16, look for the PSEA which yields 2.5%p.a interest.

Further savings are allocated to an investment portfolio to generate long term returns and maintain liquidity. However, you may prefer a different approach.

PS: Strategies to do proper financial planning for your child

Your little one has a long investment time horizons.

The first is to do a long term savings objective for your family. In the post below, you'd see how this plan by AVIVA can take care of both your child's education needs and your retirement future.

Read AVIVA MyLifeSavingsPlan | More For Child Savings Than Retirement!

And financial planning is all about building layers of assets.

You can also start building up investment portfolios for your child and if you've questions on how to start investing, this post might help you tremendously.


Josh Tan Jian Liang (CHFC) Principal Author: REVIEWS: Practising financial planner with Promiseland Independent Pte Ltd. TJL100057681 EXPERIENCE: More than 14years. Josh Tan is a young parent, speaker, author and founder of TheAstuteParent.
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