Storming the capital market: only 16% of 'Savings for Every Child' accounts are managed by banks

Savers in the 'Savings for Every Child' program are leaving the banks. During the last year, 98,000 accounts were closed in banks under the program, and new deposits were transferred to provident funds managed by insurance companies and investment houses. Thus, by the end of 2025, the share of accounts managed by banks dropped to 16%, while the share of accounts managed by provident funds rose to 84%. Among the new accounts opened, about 95% were opened in provident funds and only about 5% in banks.

Savings in banks are managed in three tracks: fixed non-linked interest (varying between banks), fixed interest linked to the Consumer Price Index, and variable interest. These tracks usually yield a return of 2%–4%. The alternative is saving through provident funds, which are exposed to the capital market and are expected to yield a higher return over time, alongside higher risk. In provident funds, one can choose between investment tracks with high, medium, or low risk levels, depending on stock exposure.

Until the beginning of 2025, those who chose to manage savings in a bank could not move to a provident fund, effectively 'locking' savers in the bank for up to eight years. A legislative amendment in early 2025 allowed for the transfer of deposits to provident funds, resulting in a significant shift toward the capital market. Bank Hapoalim absorbed the largest abandonment, with about 40,000 accounts closed—approximately 41% of all accounts closed in banks. Among provident funds, Altshuler Shaham is the largest, managing nearly a million accounts (about 31% of the market), while Analyst showed the highest cumulative profit for savers at about 711 million shekels.

The 'Savings for Every Child' program was launched in January 2017 to provide long-term savings for every child in Israel. The state deposits 57 shekels each month, and parents can double this amount by offsetting it from the child allowance. The state also covers management fees throughout the savings period. In 2025, about 3.6 billion shekels were deposited into the program, bringing the total since 2017 to approximately 25.4 billion shekels.

The rate of parents who chose to double the monthly deposit stood at 63.2%. This means nearly four out of ten parents do not utilize this option, despite the benefits of compound interest. Furthermore, in about 40% of cases, parents do not actively choose an investment track, leaving funds in the default option. Starting in January 2025, the default track is a high-risk provident fund, except for subsequent children where the previously chosen risk level is maintained.