Association for Public Policy Analysis & Management

The State of Israel has one of the highest levels of economic inequality and poverty rates among developed countries (OECD, 2017). Beginning in 2017, the Israeli government established a universal child savings account (CSA) program as a means of addressing these economic issues. Under the program, every Israeli child gets a savings account opened in their name, and the government deposits 50 shekels monthly (approximately $14) to these accounts. Participating parents can transfer additional 50 shekels from a separate child allowance into their CSAs, and select a specific savings account, which includes a choice between several low-risk/low-return and high-risk/high-return investments. The potential program payout ranges from around 12,600 to 72,900 shekels ($3,600–$20,900), depending on investment choices.

This research examines how decisions made by Israeli households with regards to their CSA accounts vary across demographic and financial household characteristics. We use population-level administrative data collected by the Israeli National Insurance Institute, which contain demographic and financial records for all Israeli households with at least one child under 18 years old, including 3.1 million children and 1.3 million parents.

Preliminary results suggest that the program has been successful in encouraging Israeli households to make additional monthly contributions. More affluent and better-educated households tend to engage with the program at higher rates. Yet, substantial differences in the ethnic composition are observed when looking at the selection of savings options. These patterns indicate that while the CSA program may increase the overall financial security of Israelis, it may also exacerbate existing economic inequality.