What is savings for every child?
As of January 2017, the National Insurance Institute will deposit a monthly sum of NIS 50 into savings accounts for each child entitled to a child allowance.
At the age of 18, the child will receive a grant of NIS 500 and will be able to cash out the money. If he does not redeem the money by the age of 21, he will receive an additional grant of NIS 500.
Who are the entities that manage savings?
Recently, the Ministry of Finance selected the banks and provident funds that will be able to manage these savings funds, including banks and institutional entities that manage provident funds; Here is the list:
Selected banks: Leumi, Hapoalim, Otzar Hahayal, Mizrahi Tefahot, Massad, International, Yahav, Discount and Mercantile.
The selected provident funds: Phoenix, Psagot, Migdal, Altshuler Shaham, Helman Aldoubi, Meitav Dash, Intergamel, Kal, Menora Mivtachim, Infinity, Excellence, Harel and Analyst.
Each parent can choose the body that will manage his children’s savings funds, and if he does not choose himself, the savings will be assigned to one of the entities according to a mechanism set by the Ministry of Finance:
What do we do with it?
During the month of December, the parents will receive a letter from the National Insurance Institute detailing the provident funds and banks chosen to manage the savings, the ways in which the saving entity can be chosen, and the possibility of requesting to double the amount of savings (with a deposit of an additional NIS 50 that will be reduced from the monthly child allowance).
Detailed information can be obtained onthe Ministry of Finance’s dedicated website on savings for every child.
1. Go to the social security website and choose, it takes 2 minutes
The National Insurance Institute has opened an online form for savings for each child that allows you to choose the governing body, the track and allows you to request to double the amount of savings (at the expense of the child allowance).
Double your savings
You can choose whether to add an additional monthly savings amount of NIS 50 to the savings amount, this amount will be transferred to the savings plan and will be paid by the National Insurance Institute out of the child allowance.
In the government savings plan, the state bears management fees until the child reaches the age of 21. This is a particularly attractive savings that will help the child in managing his life as an adult.
Choose the entity that will manage the savings and the track that suits you
The savings can be managed in a bank or provident fund, at the parent’s choice. When the saver chooses to save at the bank, it will not be possible to transfer it to another bank. Choosing a provident fund as the savings manager enables switching between the various provident funds.
If you choose a provident fund, you can choose the investment track that suits you: solid, medium-risk, or high-risk. If your child is small, be aware that the savings are actually long-term savings and may suit you with a higher level of risk than you would choose for yourself.
Didn’t choose a governing body and track?
The National Insurance Institute will choose the body and track for you:
- A child under the age of 15 on January 1, 2017 – the money will be deposited in one of the provident funds for investment, in a track with little risk.
- A child over the age of 15 on 1.12017 – the money will be deposited in a savings plan in a fixed interest rate track in the bank account in which the monthly allowance is deposited. If the bank in which the allowance is deposited is not one of the banks chosen to manage the savings, you will open a savings plan for the child at another bank chosen by the National Insurance Institute.
- A child born after January 1, 2017 – his parents will be able to choose where to manage his life until he reaches the age of six months. After that, the savings will be deposited in the body chosen by the parents to save for the child born before him. If such an entity is not chosen for a child born before him, the savings will be deposited in an investment provident fund chosen by the National Insurance Institute.
In general, saving through the bank is saving at a lower level of risk and therefore the return on money is also lower, while savings in the provident fund are at a higher level of risk due to the investment of some of the savings funds, depending on the track, in the stock exchange. If the child is young, the total accumulated savings for an 18-year-old child whose savings were managed in a provident fund is expected to be thousands of shekels higher than the amount accumulated in savings managed by the bank.
The following is a calculation by the Ministry of Finance that illustrates the difference between savings for each child managed by a bank and that managed by a provident fund:
According to the Ministry of Finance’s estimates, depositing NIS 50 a month into the “Savings for Every Child” program will provide the child with a sum of NIS 20,000 after 18 years, for which the child will be entitled to make decisions independently.
For the terms of the interest rate in the bank’s savings tracks – please note that the interest rate offered varies according to the age of the child.
For information on the yields of provident funds similar to the provident funds offered to savers
