The Saving for Every Child Program in Israel: an overview of a universal asset-building policy

ABSTRACT

In 2017, the Israeli government implemented a universal child development account programme – the Saving for Every Child Program (SECP) – which establishes a personal savings account for every Israeli child and provides monthly deposits until the child turns 18. The SECP has the potential to provide substantial assets when children reach adulthood, but the benefits depend on parents’ investment choices. The unique programme’s nature presents opportunities to learn from its implementation. This paper provides a comprehensive overview of the SECP, its legislative history, early findings from its implementation, and recommendations that may improve programme participation and outcomes across population groups.

KEYWORDS:

• Child development accounts
• Israel
• asset building
• poverty
• public policy

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. Israeli New Shekel.

2. This discussion relies on information from the NII (https://hly.gov.il/default.html).

3. This would reduce the Child Allowance payments from 150 NIS to 100 NIS or from 189 NIS to 139 NIS, depending on family size.

4. Because the SECP assumes long-term investments for the period of 18 years, we assume that each account is associated with similarly low levels of risk in the long run. In the short run, the levels of potential risks may correspond to the expected rates of return: savings accounts are associated with lower risks, and low-, medium- and high-yield investment accounts are associated with low, medium and high short-term risks, respectively. The estimates assume normal market conditions and use information about examples of investment funds provided by the NII (https://hly.gov.il/). The estimated annual percentage rates are subject to change according to market conditions.

5. Account management fees are covered by the NII until beneficiaries reach 21 years of age. Account holders are responsible for paying taxes on the capital gains. For those who will decide to keep the funds until they retire and use them after retirement, the savings will be tax-exempt.

6. Grinstein-Weiss et al. (2016) discusses several of these recommendations, including providing financial education around SECP accounts in school settings and making the accounts progressive.

7. An array of potential progressive programme structures are outlined in Gal, Madhala-Brik, Grinstein-Weiss, and Covington (2016), Grinstein-Weiss et al. (2010) and Gottlieb and Toledano (2010).

8. Assuming a 9.07% rate of return on the high-yield investment track, reported as of January 2019.

Additional information

Notes on contributors

Michal Grinstein-Weiss

Michal Grinstein-Weiss, PhD, is the Shanti K. Khinduka Distinguished Professor and Associate Dean for Policy Initiatives at the Brown School at Washington University in St. Louis. She serves as director of the university-wide Social Policy Institute at Washington University in St. Louis and as a Nonresident Senior Fellow at the Brookings Institution.

Olga Kondratjeva

Olga Kondratjeva, PhD, is the Postdoctoral Research Associate at the Social Policy Institute at Washington University of St. Louis. Her research interests include financial inclusion, financial capability, and the issues of economic and social well-being in the context of the United States and internationally.

Stephen P. Roll

Stephen P. Roll, PhD, is a Research Assistant Professor at the Brown School at Washington University of St. Louis. His research focuses on promoting asset building, debt management, and financial stability in financially vulnerable populations.

Ofir Pinto

Ofir Pinto, PhD, is the Director of Planning Policy Unit in the Research and Planning Department at the National Insurance Institute of Israel. He is interested in applying insights from economics and psychology in the context of social problems and public policy.

Daniel Gottlieb

Daniel Gottlieb, PhD, is the Deputy Director General of Research and Planning at the National Insurance Institute of Israel, and an Associate Professor on economic policy and social policy at the School of Social Work in the Hebrew University of Jerusalem. His research focuses on social-economic policy, in particular, on the issues of poverty and the labor market. Over the years he has published many research studies in professional journals, and has written chapters in books on economy and society.