![](https://i.imgur.com/CLvY2jA.png")
26-01-2022, 05:37 PM
This is a classic case of a well thought out policy that appears to make sense in theory but ending up having an opposite effect.
The whole idea for a $1 for $1 top up in CDA account is to encourage parents to spend responsibly by being 50% co-invested in their child's CDA. If the government simply deposits money into a child's CDA, many parents might be encouraged to just enroll for whatever expensive stuff without considering thoroughly in order to "encash" the free monies.
The psychology is that if you yourself also have money vested, you will be spending your own money as well and thus will be more careful. It works on the same principle as insurance co-payments and deductibles.
The problem is this creates two very bad effects on child raising:
1) The bottom quartile income parents have no means to fork out the upfront cash and end up losing a grant needlessly. This aggravates their financial situation and most are forced to only stick with the cheapest necessities for their child. From a longer term perspective, this will likely exacerbate social inequality in the future due to uneven developmental opportunities.
2) The 2nd and 3rd quartile income parents a.k.a. the middle class who can afford to unlock the grant now end up with a bloated CDA which can only be spent on a fixed criteria of items. The business people sense the increased spending power and straight away increase pricing on eligible items thereby causing higher than normal inflation on CDA claimable items. The end result is an overall increase in child raising for everyone including the rich and poor which further erodes fertility rate.
After detecting abnormal price inflation, the government likely realized the ill effects of their policy. For whatever reasons, they decided to maintain policy but tried to mitigate the second problem by introducing favorable rental policies and price caps for anchor tenants such as NTUC and PCF in order to bring the overall costs down. Subsequently they relaxed the criteria slightly such that government will make a small initial grant before requiring parents to top up for matching grants.
While this has some effect, majority of middle income parents who can afford appear to have opted to continue to spend money on expensive child services with the belief that these "real" private operators are better. If you look at kids from major operators such as PCF, NTUC and MOE-K, it's pretty apparent the kids there are disproportionately under represented by middle income families.
The whole idea for a $1 for $1 top up in CDA account is to encourage parents to spend responsibly by being 50% co-invested in their child's CDA. If the government simply deposits money into a child's CDA, many parents might be encouraged to just enroll for whatever expensive stuff without considering thoroughly in order to "encash" the free monies.
The psychology is that if you yourself also have money vested, you will be spending your own money as well and thus will be more careful. It works on the same principle as insurance co-payments and deductibles.
The problem is this creates two very bad effects on child raising:
1) The bottom quartile income parents have no means to fork out the upfront cash and end up losing a grant needlessly. This aggravates their financial situation and most are forced to only stick with the cheapest necessities for their child. From a longer term perspective, this will likely exacerbate social inequality in the future due to uneven developmental opportunities.
2) The 2nd and 3rd quartile income parents a.k.a. the middle class who can afford to unlock the grant now end up with a bloated CDA which can only be spent on a fixed criteria of items. The business people sense the increased spending power and straight away increase pricing on eligible items thereby causing higher than normal inflation on CDA claimable items. The end result is an overall increase in child raising for everyone including the rich and poor which further erodes fertility rate.
After detecting abnormal price inflation, the government likely realized the ill effects of their policy. For whatever reasons, they decided to maintain policy but tried to mitigate the second problem by introducing favorable rental policies and price caps for anchor tenants such as NTUC and PCF in order to bring the overall costs down. Subsequently they relaxed the criteria slightly such that government will make a small initial grant before requiring parents to top up for matching grants.
While this has some effect, majority of middle income parents who can afford appear to have opted to continue to spend money on expensive child services with the belief that these "real" private operators are better. If you look at kids from major operators such as PCF, NTUC and MOE-K, it's pretty apparent the kids there are disproportionately under represented by middle income families.
