Government vs Private Childcare – What Are You Really Paying For?

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Written by MoneySmart

Fretting about enrolling your child in infantcare before he or she is born? Raising a child in Singapore is somewhat like a marathon in which you have to adopt the mindset of a sprinter. It starts with registering your unborn child for infant or childcare, sometimes queuing overnight for a place at the centre near to your home. Then it proceeds on to the hula hoops you have to jump through to register your child at a primary school of your choice.

 

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Besides the efforts expended in securing a place, parents also have to contend with the costs of childcare, which caters to children from as young as 18 months, up to 6 years old when they enroll for primary school. The fees for childcare centres can cost up to $2,000+ per month depending on whether:

  • Half or full day care is required,
  • You decide to enroll your child in a government or private centres,
  • You qualify for government subsidies and
  • You choose to add on enrichment options.

Average full-day fees cost north of $900 a month and is the option that the vast majority of parents sign their precious tots for. One can imagine that for families with 2-3 young children, the costs can stack up pretty steeply.

Here are some factors to consider in weighing your different options:

1. Is it really worth it to send your child to private childcare centres that cost more than $2,000 per month?

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What if you knew that saving the difference of $1,000 per month over a 3-year period (for instance when your child is 3-6 years old) and compounding these savings over time at a modest rate of 2.5% p.a. would pay for your child’s entire university fees?

Wait, how can this be?

Currently, tuition fees for the vast majority of university courses at NUS costs under $9,000 per annum (yes, lower than childcare fees). Factoring in an inflation rate of 2% p.a., and assuming a 4-year course, your 3-year old child’s university tuition fees would cost $49,420 in 16 years’ time.

Savings of $1,000 per month over 3 years compounded at 2.5% p.a. amount to $37,405. This principal amount, without adding a single cent to it, will snowball to a tidy sum of $51,563 over 13 years when compounded at 2.5% p.a.

So, it’s true that going for an average-cost full-day childcare service of $900+ per month and saving the $1,000+ every month on fancy private childcare will literally pay for your child’s future university education.

2. Is pricier better?

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Is childcare becoming a luxury good? Is it your goal to see your child network with the sons and daughters of who’s who in society to get a headstart in life? Or are you simply equating higher school fees to higher quality of teachers and care? It is understandable that as a parent, you’d want to provide the best for your children, however, as with most things in life, costlier options aren’t necessarily better.

The fees for PCF kindergartens differ from branch to branch, but at $75-$350 per month, theirs are the most value-for-money service available for your children.

My First Skool (operated by NTUC campus) charges $615-$695 monthly before government subsidies and miscellaneous fees which add up to about $200 and a deposit of about $600 which is only refundable upon giving notice to withdraw your child from the centre.

How does these compare to private operators? MY World Preschool and E-bridge Pre-school, run by 2 anchor operators in Singapore, Metropolitan YMCA and EtonHouse International Education Group which charge about $700+ monthly.

Perhaps one useful benchmark is Spark-certified pre-schools which is a quality assurance framework which recognises and supports pre-schools in developing the holistic well-being of your children.

3. Stretch every dollar in your Child Development Account

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I love the ‘bonus’ mentality that the government ascribes to each precious baby contributed to the nation to aid with its declining birth rate. So you do not just get a bonus for work, but also for having a baby, and the more the merrier!

As is the style of our government who reward people who help themselves, the baby bonus is essentially a dollar-for-dollar matching scheme. For your 1st and 2nd child, the government will give you up to $6,000 for every dollar that you save in your kid’s Child Development Account (“CDA”) (this is a savings account that you can open with OCBC or Standard Chartered Bank).  And for your 3rd and 4thchild, the matching from the government doubles to $12,000.

Be sure to check if the childcare you intend to send your kid to is an approved institution for reimbursement using your CDA, as that essentially halves your childcare fees. Choosing between a more affordable or expensive centre makes the difference whether you CDA funds from the government last for a year or for the length of your kid’s pre-school years.

4. Other alternatives to childcare

 

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With childcare services starting from just 18 months old, is it necessary to pack your child off to school at such an early age? Some options would be for your parents or parents-in-law to care for your toddlers while you work in the day, or to hire a nanny or be a stay-home parent while your children are young.

After all, nothing beats being there to see your little ones walk or talk for the very first time. Anyway, they have at least 15-years of formal education ahead of them, a few years at the beginning spent nurturing them will build up many cherished memories for when the years of child-rearing are done and dusted.

 

Source: Moneysmart