Date: Feb 17, 2021
Remember about 3 years ago, I wrote a blog post regarding opening CPF Accounts for your kids.
This blog entry will provide more info regarding this. Enjoy!!!
Why do we want to do that? Well, many people don’t like it, because you basically cannot get the money out from CPF once your cash goes in there.
Remember, what we discussed in the blog post…
- Any year, the maximum amount of money you can top up is $37,740 per child
- They will split this into OA=$23,462.97 (62.17%), SA=$6,117.65 (16.21%) & MA=$8,159.96 (21.62%). Don’t ask me why they split it this way, because I don’t know. I just divide each by the total. All the above figures, I got it from the ACTUAL CPF statement from CPF (see below on the 17 FEB 21 BAL line).
- Based on the piece of paper where I discussed with the CPF counter officer is that, the number is approximately OA=$23,460 (62.16%), SA=$6,120 (16.22%) & MA=$8,160 (21.62%). It is actually quite close in terms of percentage %. But this is not so important.
- The important thing is for the first $60,000 of the voluntary contributions, the CPF will give you additional 1% for the interest in each category. In other words, they will give 3.5% interest for OA instead of 2.5%, they will give 5% interest for SA instead of the normal 4%, and lastly, they will also give 5% interest for MA instead of the normal 4%. If the total amount is > $60,000, whatever amount exceeded will have the normal i.e. SA=2.5%, OA=4% & MA=4% interest rate.
- Now this, only today, I get to see the CPF STATEMENT, and I think CPF system might have some error on it. As you can see from the statement, if you take the interest and divide by the pricipal, you will get SA=2.5% (suppose to be 3.5%), OA=8% (suppose to be 5%) & MA=5% (correct). I am going to ask CPF on this. Hope they can provide a good answer to me. Stay tune. So for now below, I will simulate the correct interest (which I was told by CPF officer) in Excel spreadsheet. haha
So, based on the CPF statement, if I have top up money into my son’s CPF account on Feb 9, 2018. That means that over 3 years time, I have earn the interest as below.
Year 2018: $1,250.40 (first year from Feb 9 until Dec 31, 2018)
Year 2019: $1,550.76 (full year interest of 2019)
Year 2020: $1,613.40 (full year interest of 2020)
That is a total of $4,414.56 of interest earned inside the CPF for my son.
Where can you find a “bank” that can give you such interest rate?? Hahaha. that is 11.7% of interest over 3 years (or rather 2 years and 11 months). That is about 3.9% of interest every year. This is despite of the wrong calculations given in the CPF statement.
I worked out a Excel spreadsheet to calculate what is the CPF amount after 10 plus years after the yearly compoud interest. I simulate using the correct interest which was promised to me for the first 60k.
- Assume I put maximum $37,000 on first year.
- Assume I put another maximum of $37,740 on the second year.
- So, by right, on year 2030. My son Kay will have $115,424.21 in his CPF account. This has taken into account that only first 60k is eligible to the additional 1%.
- So for 12 years, the total compound interest earned is $39,944.21. Divide this by 12 gets yearly interest of approx. $3328.68. So, divide this number over the total pricipal, i.e. $75,480, you will get approx. 4.4% of yearly interest. (this is the most simple way to do the calculation without going thru the compoound interst cycle). Which is very good.
With that kind of CPF at the age 21, he can put downpayment to buy a HDB provided he wants to get marry at young age. Hahahahaha
For me, I will save out some money monthly for the kids CPF, and then, one shot put in the saved amount for them. That is why first time I done it in Feb 9, 2018 . This time, after 3 years later, I top in another amount for them. Trying to take advantages of the the additional 1% extra for each OA, SA and MA.
Go to CPF, make appoitment to “Make Voluntary Contribution” for children. On that appointment date, bring the cheque. This is the forms.
OK, one thing I did not do 3 year ago is to apply from CPF to view Children’s CPF statement. You need a soft copy of the child’s birth cert. And you can do it online using a PC/Mac. Login to the CPF on a web browser. Download this form or get it from the counter, bring home and fill in and scan it into PDF and email to them (using the My Mailbox menu options).
So, within 5-7 days, you can have new options on your CPF statement there.
And you can download as PDF or print it, or view it online your child’s CPF statement. Provided he is not over 16 years old. After 16 years old, you cannot see liao.
As a summary and conclusion:
- You can create a CPF account for a child.
- You can top up money into your child’s CPF account.
- For first 60K, OA will get 3.5%, SA will get 5% and MA gets 5% as interest.
- Each year, there is a maximum of $37,740 you can top up for each kid. Of course you can top up lesser than that amount. Just to earn that extra 1% interest.
- You can apply to view your child’s CPF too.
- For my case, I apply to view my child’s CPF. And once I saw the amount, I think something is not right. I did not get 3.5% for my son’s OA interest. Instead I get 2.5%. For SA, my son gets 8% instead of 5%. And for MA, my son gets 5% which is correct.
- I told my two kids “Don’t say lim-lao-pek never give my sons money. Instead of give cash or bank into my sons’ bank, I put the money into their CPF accounts”. Wahahahahahahahaha. Cannot simply any how touch, but can use to buy house (as deposit), or see doctor (choy!!)
