Mass Shift from Banks to Investment Funds in Israel’s 'Savings for Every Child' Program

In the past year, 98,000 accounts under Israel's 'Savings for Every Child' program have been closed at banks, with new deposits increasingly directed to provident funds managed by insurance companies and investment houses. By the end of 2025, only 16% of accounts are expected to remain with banks, while 84% will be managed by provident funds. Among newly opened accounts, about 95% are in provident funds and just 5% in banks.

Bank savings in the program are offered through three fixed or variable interest tracks, typically yielding 2% to 4%. Provident funds, exposed to capital markets, offer potentially higher returns over time but with greater risk. Investors can choose from high, medium, or low-risk investment tracks based on equity exposure. Until early 2025, account holders who chose banks could not transfer their savings to provident funds, effectively locking them in for up to eight years. A legislative amendment in early 2025 allowed transfers, triggering a significant migration to capital market-based savings.

Bank Hapoalim experienced the largest outflow, closing about 40,000 accounts, representing 41% of all bank account closures. Altshuler Shaham is the largest provident fund manager, overseeing nearly one million accounts, or 31% of all provident fund savings. Among these funds, Analyst reported the highest cumulative profit for savers, approximately 711 million shekels.

Launched in January 2017, the 'Savings for Every Child' program provides each Israeli child with long-term savings starting at birth. The state deposits 57 shekels monthly per child, which parents can double by matching the amount from child allowances. Funds are typically withdrawn at ages 18 or 21, with additional state grants. The government covers management fees, so savers pay no fees during the savings period.

In 2025, about 3.6 billion shekels were deposited, bringing total deposits since 2017 to roughly 25.4 billion shekels. Approximately 63.2% of parents choose to double their monthly deposits, meaning nearly 40% do not take advantage of this benefit. Additionally, about 40% of parents do not actively select an investment track, so their savings default to a preset option. Since January 2025, the default is a higher-risk provident fund track, except for second and subsequent children, who retain the risk level chosen for the first child.