Why I will not be topping up my kids CPF account

From the recently released 2021 CPF annual report, it seems like we have quite a number of people under 20 years old having lots of money in their CPF. There's 10 of them with $400k to $500k!!! More than a 40 years old me... Looks like there are many people topping up their kids or grandkids CPF to help them grow their money. I think it’s a good way to start the power of compounding young at a relatively risk free rate of 2.5 to 4%...… but I will most likely not do it for my kids.

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Don't get me wrong, I like the CPF system. I think the 4% relatively risk free rate the Special Account is giving is hard to beat. I also believe that the CPF is a good financial safety net to build in your financial journey. So why am I not giving my kids a head start by helping them top up their CPF?

First and foremost, I need to build up my own financial security and retirement plan first. Before I even consider topping up the kids CPF or even leaving any kind of legacy for them, I want to make sure my wife and my financial affair are settled. I believe the best legacy we can leave for the kids is not needing them to worry about paying for our allowance, medical bills etc.… as we age. Being the sandwich generation where I have to support my parents and my kids, I definitely feel the crunch financially.

Because my parents are not very financially savvy and don't have a good retirement income, we are giving them monthly allowance to support them. We are also helping them pay for their outstanding housing loan and medical bills. Fortunately, I have 2 siblings to share this load with. I have also made use of my mum's CPF account to help lessen this load and you can read more about that here. Despite all that, a good portion of my monthly expenses still goes to my parents.

As far as possible, we hope to be able to build up our wealth and have a retirement plan so that we can pay for all of our expenses including housing loans, health insurance etc. when we retire. This will help to reduce the financial burden our kids have in needing to support us. Of course we wouldn't mind if they are well to do enough to give us some allowance but it wouldn't be something they need to be stressed about.

Second and most importantly, I think it is better for our kids to learn how to build up their own CPF. As the sayings goes "give a man a fish, you feed him for a day, teach a man to fish, you feed him for a lifetime". Instead of topping up their CPF for them, I would rather educated them about the power of compounding and how CPF is a good option for them to use as a powerful compounding tool. Then if they choose to use their savings from their Ang Bao to top up their CPF, we will be more than glad to help them with that. We might even consider matching their contribution just to nudge them along.

Having been through the journey of building up my own CPF account (which you can read more about here), I can say that it definitely helped me appreciate more on the power of compounding. The decisions I have taken and the choices I have made to build up this financial safety net and seeing the results of those choices and decisions slowly producing results definitely helped me grow and become more financially savvy. As much as I would like to have a huge sum of money in my CPF before I turn 20, I feel that the journey of learning and building up my CPF is more rewarding and I wouldn't want to take away such valuable learning opportunities from my kids.

So, above are the 2 reasons why I wouldn't be topping up my kids CPF account. To me, this sure doesn't feels like a smart financial moves to make. However, I believe it is a responsible one to make for my kids. Hopefully they will feel the same when they grow up...

As always, thanks for reading and do support me on my referral page. Stay Safe and Happy CPFing!