How can you maximize the Child Savings Program?
Small decisions in the Child Savings Program can significantly affect the amount accumulated by age 18 or 21. This page explains how choosing a provident fund and investment track, doubling deposits, and moving future deposits from a bank can help maximize savings and give your child a better financial starting point.
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The Child Savings Program is an excellent opportunity to give your children a better financial starting point in adulthood. However, a common mistake is to assume that all children in Israel will complete the program with the same amount of money in their pockets.
In practice, small decisions you make today regarding where the savings are managed, the choice of investment track, and increasing the monthly deposit amount can create gaps of tens of thousands of shekels over the years. The good news is that simple steps can significantly improve the amount accumulated for the child.
Three ways to boost your child's savings
To maximize the savings plan, you have three key tools that you can actively control:
1. Moving from a bank to a provident fund (the 2025 reform)
If you discover that your child's savings are managed through a bank track, there is no need to panic, but it is advisable to act promptly. As we have seen, the money already accumulated at the bank will legally remain there, but from 2025 onward, you can transfer all new and future deposits to a provident fund.
Historically, savings in provident funds invested in the capital market have generated much higher returns than bank savings over long periods. Even if your child is already a few years old and you missed the beginning, upgrading the deposits during the years remaining until age 18 can still make an enormous difference.
2. Doubling the monthly deposit amount
By default, the state deposits 57 NIS each month for every child. Parents have the legal option to double this amount by adding another 57 NIS, which is automatically deducted from the ongoing child allowance paid by the National Insurance Institute.
In long-term savings spanning nearly two decades, even such a small addition creates a tremendous cumulative effect thanks to compound interestA situation in which the returns accumulated on an investment are reinvested and generate additional returns themselves, creating accelerated growth of the money over time.. However, this step should be taken responsibly: if your family budget is tight, it is not advisable to create an ongoing cash-flow difficulty at home for future savings. But if your financial situation allows it, this is one of the most worthwhile long-term decisions.
3. Choosing a higher-risk investment track
When your savings are managed in a provident fund, you can choose among four main investment tracks:
- Low-risk track
- Medium-risk track
- Higher-risk track (high exposure to the capital market and equities)
- Specialized tracks (such as a Halacha or Sharia track)
For young children, many parents choose the higher-risk track. Since the rules of this program are defined in advance for a very long period (18 to 21 years), the capital market offers the highest returnThe profit (or loss) from an investment over a certain period, usually expressed as a percentage of the original amount invested. potential. Volatility and declines along the way are offset and balanced by the long time horizon available to the child until the money is withdrawn.
The bottom line: how much difference can this really make?
The winning combination of moving to a provident fund, choosing a track with high equity exposure, and activating deposit doubling from the child allowance completely changes the child's financial picture:
The conservative track versus the active track
| Selected parameters | The conservative/passive track | The active and maximized track |
|---|---|---|
| Where is the money managed? | Savings in a bank (no change) | Higher-risk provident fund |
| Total monthly deposit | 57 NIS (without doubling) | 114 NIS (including doubling) |
| Potential final savings at age 18 | Basic and relatively low savings | Tens of thousands of shekels more than the conservative track |
This is not an addition of "just a few shekels for coffee," but a strategic decision that directly affects the amount of capital available to your child when they want to finance an academic degree, buy a car, or make an initial down payment on an apartment.
Bottom line
Frequently asked questions
Can the investment track in the provident fund be changed later?
Absolutely. Unlike bank savings, where the track is locked in, flexibility is part of the rules for provident funds. You can switch among the different risk tracks (low, medium, or high) and even transfer the entire savings balance between different investment houses at any time, free of charge and without affecting the funds.
If my child is already 12 and the savings are in a bank, is it worthwhile to transfer future deposits to a provident fund?
Yes, it is still worthwhile. Although only 6 years remain until age 18 and the effect of the capital market will be more limited than for a newborn, a provident fund is still expected to generate a better return in certain tracks than conservative bank interest over this period.
Is a higher-risk track also suitable for a child approaching age 18?
As the age for withdrawing the money approaches (when the child is nearing age 17 or 18), the investment horizon shortens and the risk increases. In such a situation, if you intend to withdraw the money immediately at age 18, many parents prefer to move the savings to a more conservative track (low risk) to protect the accumulated gains from sudden market declines just before withdrawal.
In summary,
With children's savings, a small decision made today can be worth tens of thousands of shekels in the future. Even if the monthly deposit amount seems small and insignificant now, over nearly two decades, differences in returns and the compound interest mechanism do their work.
Do not remain passively on the sidelines. Check your children's accounts and secure the best possible starting point for them.