Prime Minister Lee said the country is doing well against the backdrop of an unsettled world.
But, while the country is a success story today, Mr Lee said the next 20 years will be very different.
And what Singapore becomes depends on what Singaporeans make of it.
He called on Singaporeans to work together so that their children can always find hope of a better future, an inclusive society with a heart, and the best home for themselves.
Which is why a younger group of ministers has been tasked to take a fresh look at policies and engage Singaporeans in the process.
The reality is that the world is not standing still. Emerging economies in Asia are advancing rapidly. And with it, come challenges and opportunities.
Hence, the need to review policies broadly, particularly social and education policies, said Mr Lee.
"To still be a shining red dot twenty years from now, we must rethink our approaches, and reinvent ourselves. We must anticipate changes and prepare for what lies ahead," he said.
"Singaporeans will remain at the heart of all that we do, as we update our policies to best serve our people. Core values such as meritocracy, multi-racialism and financial prudence cannot change. But within these broad principles, we should review what needs to change and where we should act more boldly."
Education Minister Heng Swee Keat will lead this charge with a team of younger ministers.
Mr Lee said they will engage Singaporeans in this review and build a broad consensus on the way forward.
And as Singapore tackles future challenges, Mr Lee said citizens need to ask some fundamental questions: What sort of future do they want? What are their aspirations?
One key strategy is to offer hope for a better future for every new generation of Singaporeans. Hence the focus on meritocracy and education, and the building of an inclusive society where the well off take care of the less fortunate.
"We will equip them with skills and knowledge to thrive in an uncertain world. We must work with parents to bring their children to more equal starting points for primary school, through good and affordable childcare and kindergartens," said PM Lee.
"We will open up more pathways in our education system, to fulfil the diverse aspirations of our young. Let us prepare every child for the test of life, not just a life of tests."
On its part, the government has started to enhance the country's social safety nets, said Mr Lee.
"As new needs have emerged over time, we have enhanced our social safety nets. We introduced ComCare to help the needy, and Workfare for low-income workers," he said.
"Low- and middle-income couples now get Additional Housing Grants to buy HDB flats. In schools, Opportunity Funds enable less well-off students to participate fully in enrichment programmes and study trips."
"This year's Budget was a further major step. We introduced new programmes. The Silver Housing Bonus is benefiting our ageing population. Increased subsidies for home-based care are helping more families with elderly parents. These are not one-off gestures, but a carefully designed package which lays the basis for stronger safety nets for the future," said Mr Lee.
The prime minister said the government will build on these initiatives in a sustainable way.
Also important is the sense of belonging and identity especially in an open globalised world.
Mr Lee acknowledged that this will be harder to nurture with the presence of new immigrants and foreign workers.
"We are managing the inflow to minimise the strains on our infrastructure and society. But Singaporeans must remain confident and open, and welcome those who will strengthen our team and help us and our children do better," he said.
"For their part, new immigrants must make the effort to integrate into our community. They must acquire our social values, our cultural values, adopt our social norms and commit their loyalty and love to Singapore."
Even as the country is open to immigrants, Mr Lee pledged that Singaporeans will be the focus of policies. "Even as we keep our society open to immigrants, we will bring up our own next generation," he said.
"Singaporeans do want to grow their own families. Many couples do wish to have children, and we will do more to support their family life and parenthood," said Mr Lee.
"I am happy that we expect more Dragon babies this year, but our fertility trend is still declining. We must go beyond the Chinese zodiac and tackle the underlying causes of our low birth rates.
"If we can create more supportive social attitudes and work environments, and lighten the burdens of parenthood, we will help couples to have more kids," he said.
For the full text and video of the Prime Minister's message, log on to www.channelnewsasia.com/nd2012
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