How does Baby Bonus and CDA actually work, worth maxing the CDA?

Question

First baby coming. Confused about Baby Bonus cash gift vs the CDA co-matching. Is it worth topping up the CDA to the max, and what can the money even be used for?

SMU Grad Xinyi · Accepted Answer

Two kids, so I know this well. Two separate things. One, the Baby Bonus Cash Gift is paid out to you in instalments over the early years, straight cash you can use for anything (diapers, milk, whatever). Two, the Child Development Account (CDA) is a special savings account where the government matches your deposits dollar-for-dollar up to a cap that depends on birth order, plus there is a First Step grant credited automatically without you depositing. The matched money is basically free money, so YES if you can afford it, top up the CDA to the cap to grab the full government match, it is the best return you will ever get. The CDA money can only be used at approved institutions: childcare, kindergarten, MediSave-related, some clinics, optical, pharmacies at approved retailers. Whatever is left in the CDA when the child turns a certain age rolls into their Post-Secondary Education Account. So max it if you can, spend it on childcare which you will need anyway. Don't leave free matching on the table.

Working Mum Denise · Answer

Key thing people miss: the CDA money is usable for your OTHER children too, siblings share. So even if your first kid doesn't use up the CDA on childcare, the balance can pay for the second kid's preschool. We used my elder girl's leftover CDA on my younger boy's childcare fees. Very handy. And the First Step grant comes without you depositing anything, so you get it regardless.

Property Agent Fiona · Answer

If cashflow is tight in the newborn period, you don't have to deposit the full CDA amount immediately, you can top up anytime before the deadline to still get the match. We spread our deposits out. Just don't forget the cutoff. Set a phone reminder because it is real money matched.

How does Baby Bonus and CDA actually work, worth maxing the CDA?

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