How to make your baby a millionaire using CPF

How much do we need to make a baby a millionaire?

$64,350, to be exact, needs to be contributed to a baby’s CPF Special Account (SA) at birth to make them millionaires.

Many Singaporean parents do not know that every Singaporean baby has a CPF account created for them at birth. The baby’s CPF account is set up as soon as the government credits the baby bonus into their baby bonus account.

This applies for Permanent Residents (PR) and their children as well. The CPF Board will set up a CPF account for the children of PRs once their parents top up their CPF account.

As parents, you should take advantage of this privilege to top up your baby’s CPF SA. Regardless of age, the first $60,000 in your child’s CPF SA would generate a whopping 5 per cent return!

If you let the power of compounding take its course and leave the SA balance untouched, the $64,350 will compound to an astronomical $1 million when your child retires 65 years later.

A depiction of a baby’s CPF SA growth path:

However, the probability of parents or grandparents being able to do a one-time contribution of $64,350 at the child’s birth is quite low. Instead, it may be more reasonable to assume a gradual annual top-up for the child.

Here are a few combinations of initial amount and annual top-ups to make a child a millionaire:

The earlier we top up the child’s SA and the larger the quantum, the fewer the years required to make them millionaires upon retirement at 65 years old.

This article was first published in MONEY FM 89.3 .