I came across this interesting article (see link below) which has given me a lot of food for thought.
Imagine if you could create a retirement fund for your kids now. The funds are put into a low-risk investment instrument that is protected by a triple-A rated country (there are only 12 such countries in the world).
In S’pore, the Central Provident Fund (CPF) is a compulsory comprehensive savings plan for working citizens that is primarily used to fund their retirement, healthcare and housing needs. Theoretically, one can open a CPF account the moment you are born.
At the moment, the retirement funds are parked in the Special Account (SA) that pays 4% per annum. It currently only accepts up to a maximum of $161,000. The funds in the SA account can only be withdrawn at the retirement age of 55. If you put away the maximum amount to your kid’s account when he is born, the long term compounding effect will mean that he will receive $1.5 million when he retires at 55!
Of course, the basic assumption here is that the 4% yield does not change for 55 years. The other negative to take into consideration is that you will be locking away funds for a very very long time.
But isn’t it wonderful that you can now leave a legacy gift to your loved ones to provide for a comfortable kitty at the tail end of their career? We are seriously considering this option now, but with a smaller amount.
http://business.asiaone.com/news/cpf-the-ultimate-trust-fund-kids
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