Israel’s Child Savings Program Sees Shift From Banks to Investment Funds After 2025 Regulation Change

Israel’s National Insurance Institute released new data revealing the success of the "Savings for Every Child" program, which has accumulated 25.4 billion shekels in deposits from parents over nearly a decade, generating profits of 3.85 billion shekels. The program, initiated in 2015 as an alternative to increasing child allowances, involves the state depositing 57 shekels monthly into a dedicated savings account for each child, with parents able to add an equal amount from their child allowance. The funds are invested in the capital market and can be withdrawn when the child turns 18, with an additional bonus for waiting until age 21.

A regulatory change implemented in 2025 allowed account holders to transfer their savings from banks to provident funds, triggering a mass migration away from banks. Since then, 98,000 accounts moved from banks to provident funds, and banks lost a total of 132,000 customers in 2025. Bank Hapoalim lost 53,000 customers, and Bank Leumi lost over 25,000. Bank Hapoalim remains the largest bank in the program with 236,000 accounts, while Bank Leumi holds 121,000 accounts but ranks below all provident funds.

Investment houses and insurance companies have seen dramatic growth in customer numbers. Infinity Investment House increased its customers by 63,000 (a 35% rise), Meitav added over 48,000, and Analyst saw similar growth. However, the largest provident funds, Altshuler Shaham and Harel, experienced net losses of 8,600 and 40,000 accounts respectively, despite holding the majority of accounts.

The program offers three investment tracks based on risk: high, medium, and low, plus religiously compliant options. Due to the long-term nature of the savings, the high-risk track is recommended and yields the highest returns. In 2022, the default investment option was changed from low to high risk. Sixty percent of parents actively choose their investment track, consistent with previous years. Additionally, 63% of parents opt to double their monthly deposit, up from 58% the previous year, enhancing potential long-term returns through compound interest.

The program also includes additional grants for children born before 2017 to compensate for the period before the program’s inception. Withdrawals are subject to capital gains tax unless transferred to a pension fund, which can defer taxation. This evolving landscape reflects a significant shift in Israeli savings behavior for children, with investment funds increasingly preferred over traditional banks.