Inclusive Child Development Accounts

Toward Universality and Progressivity

Jin Huang, Li Zou, Michael Sherraden

• Publisher: Routledge
• Year: 2020
• Print ISBN: 9781032838908
• eBook ISBN: 9781000048254
• Edition: 1
• Topic: Medicine
• Subtopic: Business Education

Inclusive Child Development Accounts showcases the global context of emerging asset-building policies and programmes around Child Development Accounts.

Child Development Accounts (CDAs) are subsidized accounts that enable families to accumulate assets to invest in children's development and life goals, such as postsecondary education, homeownership, business development, and retirement security. The vision for CDAs is to be universal (meaning everyone participates), progressive (meaning greater subsidies for the poor), and lifelong (meaning from the cradle to the grave). Since 1991, schools, communities, states, provinces, and entire countries have launched various CDA programs and policies. In the first part of the volume, scholars highlight the core feature of "inclusiveness" of CDAs in Singapore, Israel, and the United States. In the second part, scholars report on CDA policies and projects in Taiwan, Uganda, Korea, and mainland China.

Showing how asset building can be effective in diverse cultural and social contexts, and that all these contexts emphasize the investing in children early in life and empowering of them to achieve their potential as productive citizens, Inclusive Child Development Accounts will be of great interest to scholars of social work, policy, investment, and development, as well as financial inclusivity. It originally published as a special issue of the Asia Pacific Journal of Social Work and Development.

Building assets from birth: Singapore’s policies

Vernon Loke and Michael Sherraden

ABSTRACT

Singapore has created innovative, inclusive and comprehensive asset-building policies designed to promote social stability and development. Asset building from early childhood is an important part of this overall strategy. In 1993, Singapore’s government initiated a universal child asset-building policy, Edusave, which provides resources for improving educational outcomes. Since then, three additional asset-building policies for children have been implemented: the Baby Bonus and Child Development Accounts (CDAs), Post-Secondary Education Accounts (PSEAs) and Medisave, a health savings account. We discuss each of these asset-building accounts for children in Singapore. We point out distinctive features and assess key elements in overall policy design.

Introduction

Singapore has a comprehensive and integrated policy framework for building assets across the life course. Indeed, this is the most prominent theme in Singapore’s social policy (Sherraden, 2018). The purposes of this policy theme are to create a nation of asset holders, develop every citizen to reach his or her potential, and promote social stability and development. In this context, four types of asset-building accounts in Singapore focus specifically on children: (1) the Baby Bonus and Child Development Account, (2) Edusave, (3) Post-Secondary Education Accounts, and (4) Medisave for Newborns. These four policies enable children to accumulate assets, and as such, could be categorised together as compreshensive Child Development Accounts (CDAs).

CDAs are subsidised savings or investment accounts that enable children to accumulate assets for life course needs and their social and economic development. Ideally, CDAs are universal, progressive and lifelong, starting at or near birth (Sherraden, 1991; Sherraden, Cheng et al., 2018). In this paper, we review existing research, government data and other publications to present an overview of the asset-building policies that target children in Singapore. We begin by reviewing Singapore’s four asset-building accounts that focus on children, assess the design elements of those policies, reflect on their basic features, and conclude with some policy recommendations for other countries seeking to implement similar policies.

Table 1. Baby bonus benefits.

Baby bonus component	Benefits for 1st or 2nd child	Benefits for 3rd or 4th child	Benefits for 5th child onwards
Cash Gift (into parents designated bank account)	S$8,000	S$10,000	S$10,000
First Step Grant (CDA account)	S$3,000	S$3,000	S$3,000
Dollar-for-dollar savings match (CDA account)	Up to S$3,000	Up to S$9,000	Up to S$15,000
Total benefits	Up to S$14,000	Up to S$22,000	Up to S$28,000

Table 2. Ten key CDA policy design elements.

	Edusave Account	Child Development Account (CDA)	Post-Secondary Education Account (PSEA)	Medisave Account and Medisave Grant for Newborns
1. Universal eligibility	Yes	Yes	Yes	Yes
2. Automatic opt-out enrolment	Yes	No	Yes	Yes
3. Automatic initial deposit	Yes	Yes	Yes	Yes
4. Automatic progressive subsidy	No	No	No	No
5. At-birth start	No	Yes	Yes, when integrated with CDA	Yes
6. Centralised savings plan	Yes	Yes	Yes	Yes
7. Targeted investment options	No	No	No	No
8. Potential for investment growth	Limited	Limited	Limited	Limited
9. Restricted withdrawals	Yes	Yes	Yes	Yes
10. Public benefit exclusions	Yes	Yes	Yes	Yes

Asset-building accounts focusing on children

This section summarises Singapore’s four asset-building accounts for children – Edusave, Baby Bonus and CDAs, Post-Secondary Education Accounts and Medisave for Newborns – that make up its integrated CDA policy. The policies are presented in the order in which they were established. Though the policies function via asset building, the underlying purposes are to develop individuals and families in Singapore. Objectives for each policy are different, including promoting higher birth rates, supporting families, investing in children, and building human capital. In other words, asset building for children is not an end in itself, but rather a means to achieve important social goals.

Edusave

The Education Endowment Scheme Act of 1993 established in Singapore is one of the earliest known universal child asset-building policies in the world (Curley & Sherraden, 2000; Loke & Sherraden, 2009, Loke & Sherraden, 2015). Also known as the Edusave Scheme or simply Edusave, this policy aims to enhance the quality of education in Singapore, and to increase educational opportunities for all Singaporean children aged 7–16 years (Singapore Ministry of Education, 2017). Edusave is multifaceted, functioning through grants to support educational institutions; merit awards and scholarships to students; the Edusave Pupil Fund; and Edusave accounts. As with several other social policies in Singapore, Edusave itself is based on underlying assets. A S$1 billion Edusave Endowment Fund was established by the government in 1993, and returns from this fund, which has since grown to S$5.5 billion, support all the programmes in the Edusave Scheme. (At this writing, S$100 is equivalent to US$73).

For this paper, the policy component of interest is the Edusave account. When a child turns 7, he or she automatically receives an Edusave account. Annual government contributions and periodic one-off grants fund these accounts. In 2018, students in primary schools (grades 1–6) receive S$200 in annual contributions, and those in secondary schools receive S$240. Accountholders also receive occasional top-offs in the accounts from the government. For example, in 2015, accountholders received an additional S$150 one-off grant from the government. Such contributions and grants are automatically deposited. Starting in 2019, the annual Edusave contributions from the government will be increased to S$230 for primary-level students and S$290 for secondary-level students (Singapore Ministry of Finance, 2018).

The government is the sole funder of Edusave accounts. The accounts are a receptacle into which the government can deposit annual contributions and periodic grants. There is no provision for additional deposits from other persons or entities. Edusave accountholders can use funds accumulated in Edusave accounts to pay for school fees, other school charges, or enrichment programmes. Balances in these accounts earn guaranteed interest of at least 2.5% per annum. When an accountholder turns 17 or leaves secondary school, any unused balance in the Edusave account is transferred to his or her Post-Secondary Education Account (Singapore Ministry of Education, 2017).

Baby bonus and child development accounts

In 2001, Singapore’s government enacted the Child Development Co-Savings Act, to both incentivise childbirth among Singaporeans, and also to create an environment conducive to raising families. In addition to the provisions of maternity, paternity, shared-parental, infant-care, and childcare leave, the Act also established the Child Development Co-Savings Scheme. Popularly known as the Baby Bonus Scheme and Child Development Accounts (CDA), the Child Development Co-Savings Scheme has benefitted from several enhancements since its inception, including an increase in benefits and extension of benefits to all Singaporean children. Parents sign up (opt-in) for the Scheme by completing a simple online application form as early as 8 weeks prior to the child’s estimated delivery date. Taking less than 10 minutes to complete, the application asks for basic demographic information about the family and child, as well as instructions on which banks the parents designate to receive the benefits.

This asset-building policy comprises two tiers. The first tier is an unrestricted cash gift from the government of S$8,000 for the first and second child, and S$10,000 for each subsequent child. The government disburses this cash gift within 3 weeks after the birth of the child, depositing it directly into a designated parent’s bank account in five instalments over 18 months.

The second tier consists of the CDA, which begins with the CDA First Step grant. The CDA is a restricted savings account that the government matches dollar-to-dollar. The CDAs open automatically at a commercial bank the parents designate, within 3–5 working days of the child’s birth registration or after the completion of the online application form. To kickstart savings in the CDAs, the government seeds each account with S$3,000 from the CDA First Step grant. Private contributions to CDAs (usually from parents) are matched by the government up to a cap of S$3,000 for first- and second-born children, S$9,000 for the third- and fourth-born children, and S$15,000 for fifth-born and subsequent children (see Table 1). The co-savings match contribution publicly affirms and supports parents as having the primary responsibility of raising their children. Families can contribute to their children’s CDAs and enjoy the savings match until December 31 of the year the child turns 12.

In addition to the CDA First Step grant and the savings match from the government, CDAs also receive periodic top-ups from the government. For example, in 2015, children who were 6 years or younger received an additional top-up of S$300 or S$600 into their CDAs, depending on the household’s economic status (Singapore Ministry of Finance, 2015).

At this writing, balances in CDAs earn guaranteed interest of around 2% per annum. Monies in these accounts may be used to cover expenses incurred by the accountholder or their siblings, related to childcare, preschool and kindergarten, and special education or early intervention programmes. Accountholders or their siblings may also use CDA funds for medical care, pharmaceuticals, assistive technology, eye care and health insurance. In sum, the CDA resources target education and health, two key components of human capital. Any unused balance in a child’s CDA is later transferred to the child’s Post-Secondary Education Account when the child turns 13.

Post-secondary education accounts

First announced in 2005 and established in 2008 by revising the Education Endowment Scheme Act to become the Education Endowment and Savings Schemes Act, Post-Secondary Education...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Citation Information
• Notes on Contributors
• Foreword
• Introduction: Toward universal, progressive, and lifelong asset building
• Part I Inclusive Child Development Account Policies
• Part II Child Development Account Programs and Projects
• Conclusion: Policy models for child development accounts: vision, potential, strategies
• Index