What Is the Savings for Every Child Program?
Since January 2017, the National Insurance Institute has been depositing NIS 50 per month into savings accounts for children entitled to a child allowance.
At the age of 18, the child will receive a grant of NIS 500 and will have the option to withdraw the funds. If the money is not withdrawn by the age of 21, an additional grant of NIS 500 will be awarded.
Who Manages the Savings?
The Ministry of Finance has selected banks and provident funds to manage these savings accounts. These include banks and institutional entities responsible for provident funds. The selected entities are:
Selected Banks:
Leumi, Hapoalim, Otzar Hahayal, Mizrahi Tefahot, Massad, International, Yahav, Discount, and Mercantile.
Selected Provident Funds:
Phoenix, Psagot, Migdal, Altshuler Shaham, Helman Aldoubi, Meitav Dash, Intergamel, Kal, Menora Mivtachim, Infinity, Excellence, Harel, and Analyst.
Each parent may choose which institution will manage their child’s savings. If a choice is not made, the savings will be assigned to an entity based on a mechanism set by the Ministry of Finance.
What Should You Do?
In December, parents will receive a letter from the National Insurance Institute outlining the selected banks and provident funds, the process for choosing a managing entity, and the option to double the savings amount (by contributing an additional NIS 50, deducted from the monthly child allowance).
Detailed information is available on the Ministry of Finance’s dedicated website on Savings for Every Child.
How to Choose a Savings Track
- Visit the National Insurance Institute website and make your selection—it only takes 2 minutes.
- The National Insurance Institute has launched an online form where parents can select the managing entity, the investment track, and request to double the savings amount (using part of the child allowance).
Doubling Your Savings
Parents can choose to contribute an additional NIS 50 per month, which will be transferred directly to the savings plan. The National Insurance Institute covers management fees until the child reaches 21, making this an attractive long-term savings option.
For an estimate of potential savings, use the savings calculator (please note that the calculator does not account for interest).
Choosing a Managing Entity and Track
Parents can opt for a savings plan managed by either a bank or a provident fund:
- If savings are managed by a bank, they cannot be transferred to another bank later.
- If savings are managed by a provident fund, switching between different funds is possible.
- When choosing a provident fund, parents can select an investment track: low-risk (solid), medium-risk, or high-risk.
For young children, long-term savings might justify choosing a higher-risk track compared to what parents might select for themselves.
What Happens If No Selection Is Made?
If parents do not choose a managing entity or investment track, the National Insurance Institute will assign one:
- Children under 15 (as of January 1, 2017): The funds will be deposited in a provident fund with a low-risk investment track.
- Children over 15 (as of January 1, 2017): The funds will be placed in a fixed-interest savings plan within the bank where their child allowance is deposited. If that bank is not an approved managing institution, the National Insurance Institute will open a savings account at another selected bank.
- Children born after January 1, 2017: Parents have up to six months to choose a managing entity. If no choice is made, the funds will be deposited into the same institution selected for their previous child. If no prior selection exists, the savings will be assigned to a provident fund chosen by the National Insurance Institute.
Bank vs. Provident Fund: Understanding the Differences
- Bank savings have lower risk but also lower returns.
- Provident fund savings involve investments (e.g., in the stock market), meaning higher risk but potentially higher returns.
For younger children, long-term savings in a provident fund are estimated to yield significantly higher returns than savings managed in a bank.
According to the Ministry of Finance, depositing NIS 50 per month into the Savings for Every Child program could provide a child with NIS 20,000 after 18 years, giving them full control over how to use the funds.
Additional Information
- For information on managing children’s savings through bank savings plans, detailing various fixed and variable interest rate options, withdrawal conditions, and age-based interest adjustments see here.
- For information on managing children’s savings through investment provident funds, offering different risk-based investment tracks, enabling fund transfers, and displaying historical returns for comparison see here.
- Learn more about Savings for Every Child on the National Insurance Institute website.
Source: Israel Ministry of Finance
