Child Savings Plan Choices Can Add Tens of Thousands of Shekels

Launched in January 2017, the "Savings for Every Child" program requires the National Insurance Institute (Bituach Leumi) to deposit a fixed monthly amount into a savings account for every child eligible for child allowances. The program aims to ensure every young adult begins their independent life with a starting financial nest egg. Parental decisions regarding monthly contributions, financial institutions, and investment tracks can significantly alter the final accumulated sum by thousands or even tens of thousands of shekels over time.

As of 2026, the National Insurance Institute deposits 58 NIS per month for each eligible child until they reach the age of 18. Participation is fully automatic for any child receiving a child allowance, without any income testing.

Parents can choose to double the monthly deposit by deducting an additional 58 NIS from the child allowance, bringing the total monthly contribution to 116 NIS, equivalent to 1,392 NIS annually. This doubling feature can be activated or canceled via the Bituach Leumi website. However, parents whose child allowances are offset due to outstanding debts to the National Insurance Institute cannot double their contributions until the debt is fully settled.

Government Grants Along the Way

In addition to monthly deposits, Bituach Leumi grants financial bonuses based on the child's age and year of birth. Children born from January 2017 onward are eligible for a 291 NIS grant at age 3, and an additional 291 NIS grant at age 12 for girls or age 13 for boys. Conversely, children born before January 2017 receive a 582 NIS grant upon turning 18.

Generally, savings funds cannot be withdrawn prior to age 18, barring specific programmatic exceptions. At age 18, the funds can be withdrawn with parental consent or left in the savings account. Individuals who choose to leave the funds untouched until age 21 qualify for an additional 582 NIS grant. From age 21 onward, funds can be withdrawn without requiring parental approval.

Bank Deposits Versus Provident Funds

One of the most consequential decisions in the program involves selecting the managing institution and investment track. In a bank savings plan, returns depend entirely on the chosen interest rate track. In an investment provident fund, capital is invested in the capital market, meaning returns fluctuate based on investment performance and the risk level of the track.

When the program started in 2017, the default option for children under 15 was a low-risk provident fund assigned rotationally. Children aged 15 and above were automatically directed to bank deposits with fixed, unlinked interest rates. Furthermore, the selection made for the firstborn child in a family automatically dictated the savings track for subsequent siblings, meaning a family choosing a bank for their first child maintained that track for later children.

Modernizing Default Tracks

This conservative default structure faced widespread criticism, largely because an 18-year savings horizon easily absorbs short-term market volatility and often warrants higher equity exposure. Consequently, starting in January 2025, a major shift took place: when parents fail to select an active track for a new child, the new default is a provident fund, regardless of whether an older sibling’s savings are managed at a bank.

For an only or firstborn child, the default setting is now an enhanced-risk equity track. This means children whose parents do not make an active choice are automatically channeled into higher capital market exposure, a sharp departure from the conservative defaults established at the program's inception.

It is also critical to understand transfer limitations: accumulated savings residing in a bank cannot be transferred retroactively to a provident fund. Nevertheless, starting in January 2025, participants can request that future deposits be funneled into a provident fund while existing bank-held capital remains untouched.

Massive Potential Gaps

To illustrate how profoundly investment choices impact accumulated wealth, consider a newborn child with an 18-year savings timeline. Assuming parents deposit only the baseline 58 NIS per month without doubling, and ignoring state-provided grants along the way:

In a scenario where the savings generate an average annual return of 4.5%, the total accumulation after 18 years reaches approximately 19,000 NIS. By contrast, under a scenario yielding an average annual return of 9%, the final amount climbs to roughly 30,000 NIS.

What happens if parents double the monthly deposit to 116 NIS? Under identical assumptions, a 4.5% annual return yields about 38,000 NIS, whereas a 9% return accumulates to approximately 60,000 NIS. Consequently, the performance gap between the two return rates widens to roughly 22,000 NIS when monthly deposits are set at 116 NIS.

"This theoretical calculation relies on a constant, uninterrupted rate of return across the entire timeline and does not constitute a guaranteed financial projection. A 9% annual return is never assured, and capital market equity tracks carry a tangible risk of loss."

By contrast, fixed-rate bank savings accounts offer predetermined interest rates known in advance, though participants must factor in the erosive impact of inflation and specific track constraints.

Available Investment Tracks

Bank savings plans offer fixed interest rates that are either unlinked, linked to the Consumer Price Index, or variable.

Provident funds feature various risk tiers: low, medium, and high. Generally, higher risk categories present stronger potential for long-term yields, yet they simultaneously entail heightened volatility and a greater probability of short-term losses.