The South Korean government will introduce the Woori Ai Jaripfund, or Our Child Independence Fund, in the second half of next year to help children start adult life with a lump sum of savings. The government will add up to 1.2 million won a year depending on household income, and if the government and parents together set aside 2 million won annually for 19 years with an average annual return of 6%, a child would have more than 70 million won upon reaching adulthood.
Savings Start at Birth, With Up to 1.2 Million Won a Year From the State
Under the 2027 budget plan approved at a Cabinet meeting on the 1st, the government has newly allocated 146.5 billion won to launch the fund. The launch is targeted for the second half of next year, and the budget plan will be finalized in early December after review by the National Assembly.
The fund is a financial product opened in a child's name, into which the government and parents contribute jointly from birth until the child turns 18, with the money invested over the long term. The aim is to provide seed money that children can use when they enter society as adults, for education, housing or starting a business.
The first group eligible is about 320,000 children born on or after September 1 this year. Not all households will receive government contributions. State contributions go to households earning up to 150% of the median income, with the method and amount varying by income level.
The largest support goes to households at or below 50% of the median income. Even if parents cannot contribute separately, the government will provide a flat 1.2 million won a year per child.
Households above 50% and up to 100% of the median income receive a one-to-two match. If parents contribute 500,000 won a year, the government adds 1 million won, for a total of 1.5 million won annually. Households above 100% and up to 150% of the median income receive a one-to-one match, with the government adding 1 million won when parents contribute 1 million won a year. No government contribution is provided above 150% of the median income.
For 2027, 150% of the median income for a four-person household is 10,394,828 won a month. A four-person household earning more than about 10.4 million won a month is therefore excluded from state support.
19 Years of 2 Million Won a Year Yields 71.57 Million Won, If 6% Holds
The government is counting on the compounding effect of long-term investing. Under a scenario presented by the Financial Services Commission, setting aside 1.2 million won a year for 19 years at an average annual return of 6% would turn total contributions of 22.8 million won into 42.94 million won.
The gap widens when parents and the government together contribute 2 million won a year. Actual contributions over 19 years would total 38 million won, but under the same return assumption the balance at maturity would reach 71.57 million won. That works out to investing about 167,000 won a month to build assets of more than 70 million won.
The 71.57 million won figure, however, is not a guaranteed amount when the child reaches adulthood. Because the money is invested in a fund over the long term rather than earning a fixed rate as with deposits or installment savings, the actual payout will depend on investment performance. The figure presented by the commission is an illustration based on the assumption of uninterrupted contributions for 19 years and an average annual return of 6%.
Where the money will be invested has not been decided. Achieving an average annual return of 6% would be difficult through deposits, installment savings or bonds alone, raising the possibility that some portion will be allocated to riskier assets such as stocks.
Exchange-traded funds tracking the KOSPI 200, the country's benchmark index, are among the candidates under discussion, but fees are also a key variable given the long duration of the product. Even a small difference in fees, compounded over 19 years, could produce a significant gap in the final return.
Starting with this fund, the government plans to move asset-building support earlier, from young adulthood to childhood, and strengthen support across the life cycle. To that end, it plans to expand related spending next year to 4.2 trillion won, up 1.3 trillion won from this year.
