Every parent is concerned about their child’s future, with finances being a primary issue. As a parent, you want to make appropriate financial decisions for your children. Fortunately, there is a method to invest in their financial security early in life.
Programs like POSB Smiley Child Development Account (CDA) are special savings accounts for your newborn, with dollar-for-dollar matching from the government. Learn more about the CDA account by visiting their website.
So, why should your child have a savings account? There are numerous advantages to starting a savings account for a child.
Encourages the practice of saving
Opening an account for your child is a great method to teach them the value of saving, as they will be able to observe the growth of their funds. The compounding interest gained on a savings account will encourage your youngster to save more over time. This educates children to prioritize saving overspending.
Helps pay for costly expenses
A savings account for your child can also help you pay for big future expenses, such as college fees, at least in part. It also teaches the importance of planning for the future and conserving well in advance.
A child’s savings account can help them get through the classic “rainy day.” The savings can save your family, whether it’s a medical emergency or something else unexpected.
Considerations When Opening a Bank Account for Your Child
Before deciding to start a savings account for your child, there are several factors to consider.
The minimum age to operate a bank account independently is 10 to 12 years. Still, banks like POSB allow you to open POSB Smiley Child Development Account (CDA), special savings account for your newborn, with dollar-for-dollar matching from the government.
When opening a savings account for your child, ensure that the bank offers the “standing order” feature so that you can transfer a set amount of money from your account to the child’s account at regular intervals. This eliminates the inconvenience of manually transferring funds.
If you have a CDA account, it’s bundled with your Reserved Account(s), being My Account (Personal or Joint-Alternate). If you have an internet banking and official email address, your account will be automatically enrolled with eStatement
Inquire with your bank about the specifics of online transactions from the child’s account. For online transactions, a login ID and a password should be supplied. You should also ensure that online transactions are subject to limitations.
There are minimum balance requirements for the savings account of a child. You may incur a penalty if the funds fall below this threshold.
Check a bank’s daily and yearly maximum spending limitations before opening savings account for your child so it cannot be spent more than the allowed amount.
CDA account proceeds can be used to pay for childcare or medical expenses at Approved Institutions (AIs) registered with the Ministry of Social and Family Development (MSF) via NETS or interbank GIRO. Whether a baby’s savings account is appropriate for you hinges on your objectives. These accounts can be a great way to encourage your child to save early on and give them financial security.