Israelis Place Billions in Low-Interest Savings Accounts
Translated & summarized from Al-Shams by baba
Around 43% of funds moved to Israeli bank deposits in September, totaling 14 billion shekels, were placed in short-term accounts earning an average of 1.36% interest. Daily deposits attracted 6.3 billion shekels at less than 0.7% interest, potentially losing value to inflation. Longer-term deposits and money market funds offer significantly higher returns, prompting a call for savers to compare options carefully.
The story in 6 lines · by baba
- Israelis deposited 14 billion shekels in short-term savings accounts with an average interest rate of 1.36%.
- Daily deposits attracted 6.3 billion shekels at an average annual interest rate of just 0.67%.
- Low returns on short-term deposits risk eroding the real value of savings due to inflation.
- Fixed-term deposits of 6-12 months offered a higher average annual interest rate of 3.54%.
- Money market funds provide potential annual returns between 3% and 3.25%.
- Savers are urged to compare interest rates, terms, and fees to maximize their returns.
Data from the Bank of Israel, published by Calcalist, reveals that approximately 43% of funds moved from checking accounts to bank deposits in September were placed in short-term deposits, including daily, weekly, and one-month terms. These short-term deposits totaled around 14 billion shekels, earning an average annual interest rate of just 1.36%. Daily deposits alone attracted about 6.3 billion shekels, with an average interest rate not exceeding 0.67% annually. This low return risks eroding the real value of savings if inflation outpaces interest gains.
Despite the limited interest, short-term deposits offer depositors quick access to their funds, which may suit families needing readily available money for emergencies or daily expenses. However, this liquidity comes at a cost compared to other options. Money market funds, for instance, offer expected annual returns between 3% and 3.25%, with their asset growth reaching a maximum of 4.6 billion shekels, less than a third of the amount placed in short-term deposits. In contrast, fixed-term deposits ranging from 6 to 12 months attracted 8.6 billion shekels, yielding an average annual interest rate of 3.54%, highlighting significant differences in returns based on savings duration and type.
Money market funds are not universally the best option, as their risks, fees, and conditions differ from bank deposits, and their returns can fluctuate with market interest rates. For households holding money in bank accounts or short-term deposits, it is crucial to compare the actual interest rates offered by banks, the deposit duration, early withdrawal conditions, and any fees that might affect the final return. Comparing interest rates against the inflation rate is also essential to determine if savings are maintaining their purchasing power or if low returns will diminish future spending capacity. The data does not imply all bank deposits offer low interest, as rates vary by bank, deposit type, duration, and terms, making average comparisons insufficient for financial decisions.
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