Where I deposit my kids Ang Bao

8 CNY Customs Angbao

There are many ways to safekeep your kids ang bao money. I’ll share how i keep or rather deposit.

It’s the time of the year where all the kids are joyful about. Chinese new year period where everyone is wearing red and went to relatives house for visiting and eating good and expensive food which normally we won’t be preparing regardless we dine in or out. The kids are excited with receiving Ang Bao and not forgetting all the sweets and chocolate that’s always readily available.

There are a few ways to grow your kids ang bao money. Typically parents will keep in bank saving account or fix deposit, invest into the stock market by picking individual stocks, invest into STI ETF and save the trouble of monitoring the market and lastly contribution into CPF. Where do I deposit their ang bao money for them yearly? The answer will be CPF and why is it so? Please read on.

Bank Account

From my point of view, this option is the worst and parents should avoid it at all costs. For first $10,000, the bank is giving 0.05% interest. The $10,000 sitting in the bank will give you $5 as interest after one year which is just enough for a Happy Meal at MacDonalds which cost you $4.90.

Posb saving account
POSB website

And worse, 0.05% is not enough to beat inflation. You are technitally losing money every year by keeping money in saving account.

statistic id379423 inflation rate in singapore 2022

Stock picking or ETF

I’ll love to do stock picking but as the capital is low ya kids ang bao never collect much enough. The funds will not be able to diversify and most likely will have to adopt an all-in situation so as to not incur too much on commission fees. Another option is to invest into STI ETF yearly and forget about it and check the P&L yearly. In today market, STI ETF will yield 3% in dividends and another 2% in returns. However, there is a possibility that your investment will go into red. Below chart showed that if you enter at a wrong timing, your investment will be in loss and this means that your returns will take longer to recover and that’s not what I want for my kids’ money. The money in future will be used for their housing purpose.

CPF Contribution

CPF contribution is my decision to deposit my kids ang bao money. No prize for guessing it. The primary reason for keeping it in CPF is I wanted them to use for housing purpose. CPF will give 3.5% for Ordinary Account and 5% in
Special & MediSave Accounts for the first $60,000. I will be topping up to their Voluntary Contribution (VC) scheme with $1000 each. Luckily I only have 2 kids so not a big hole in my pocket.

CPF contributions are first allocated to the Medisave Account, followed by the Special Account. The balance is then allocated to the Ordinary Account. As I’m contributing $1000, 21.62% will go into Mediasave account and 16.21% will be Special Account. The balance will be Original Account. With that being done yearly, I’m pretty sure they are having a good start.

And Yeah, topping up your child CPF doesn’t give you tax relief.

Author: The Financial Guy

2 thoughts on “Where I deposit my kids Ang Bao

    1. Singapore Citizen newborns after 1st Jan 2015 will be qualify for the enhanced $4,000 MediSave Grant for Newborns. A CPF MediSave account will be opened for each newborn, and the grant will be credited automatically.
      Another way is once you do a VC to your child NRIC, CPF will automatic open an account for your child.

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