Asked 3w ago
My child's CDA account interest rate is 2%. if i can find investment like robo-advisor return rate which is more than 2%, is it better to invest there than top up in CDA?
The rate of return you should look at is not 2%. Rather, because the government matches your contribution, it is in fact a 100% rate of return for a year. Since this is risk free (in terms of getting the government matching), then you also have to see if there are any risk free instruments that give 100% in a year (there are none).
That's why it is a good idea to top up to the CDA account, especially if you intend to use the money on your kid. The government is subsidizing your cost of raising a child, and that can only be a good thing.
Definitely worth it to top up. You get $3k from the government when you open the account, and a further $3k from topping up $3k. You can see that as a 100% or 200% return - risk-free, no roboadvisor can top that. Plus the 2% return risk-free return cannot be matched by anything else out there, except Singlife savings account.
Cda can be used to pay infantcare/childcare, which is something you will eventually pay anyway. Hence I don't see the money as being locked up.
Taking the gov dollar for dollar matching gives you "free cash" to spend on your kid. Most parents will then use CDA to pay for infant care, child care services, vaccinations, etc. This way, you don't have to use your own cash and you free your cash for other purposes.
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