The data for the "Savings for every child" program: the weaker population loses
The Treasury presented an analysis of public deposits to the government savings plan, which shows that the lower quintiles of the population prefer security in bank deposits, while the upper deciles prefer the excess returns of investment through provident funds.
The low quintiles in the Israeli population are flustered by the capital market and want security, although this is costing them, and especially to their children, for now, at a loss of return (money). This conclusion emerges from a presentation presented to the government by Finance Minister Moshe Kahlon regarding the provident funds and the deposits of the designated banks for the purpose of "saving for every child and girl". According to the presentation prepared by the Budget Department at the Ministry of Finance, "disadvantaged populations are choosing less lucrative routes."
The Treasury's presentation of the plan's truth data also revealed that "the data shows that deposits with provident funds achieved a much higher return than deposits with banks. The maximum return on a provident fund was 7.21%, while the maximum in the bank was 1.39%." Looking at all the routes, according to the Treasury, this is a "277% gap between the provident fund and the bank's savings". This indicates a need to increase financial education among the weaker population.
In January 2017, the state launched a savings plan for every child entitled to a child allowance, under which the state deposits NIS 50 a month each month, until they reach the age of 18, in addition to the child allowance paid for it. These funds are transferred to the savings in the name of the child in a provident fund or a bank of their choice, which may add an additional NIS 50 to the child's savings - thus doubling the savings amount to NIS 100 a month.
These are annual deposits of cumulative NIS 600 (state deposit) or NIS 1,200 (if the parents also deposit) for each child, which, before the accumulated return, accumulates to NIS 10,800 or NIS 21.6 thousand until the child reaches the age of 18. On the birthday On the 18th, each child will be able to enjoy another NIS 500 grant, and the savings deposits will cease. As of the end of 2018, the program had 3.33 million child savings plans.
In long-term investment management, the perception that higher-risk trajectories are more prevalent, such as investment in stock markets, yields higher returns over time. However, as the treasury presentation shows, not all the public adhere to this concept.
"Weak populations tend not to make another deposit"
The data in the presentation (which refers to 2017-2018) shows that about 30% of the families in the bottom three quintiles of the population (in terms of income) opted for a fixed interest rate savings with the banks, which, as a rule and over long periods (excluding long periods of market declines), show a low return on investment risk More - directed to the capital markets, with emphasis on stock markets. In contrast, "only" 29% to 36% of the bottom three quintiles opted for provident funds.
In contrast, only 17% of the top quintile opted for savings through bank deposits, with 61% of the top two deciles opting for savings through provident funds - which do not guarantee returns, but should provide a higher return than deposits (which has been the case since the plan was launched).
But not only that, in the lower two quarters, the proportion of parents who refrained from making a decision on the most desirable investment channel was higher - more so than those who chose banks and camel. The non-decisive rate declines clearly and consistently, as income increases, with only 22% of the fifth quintile not making a conscious decision on the issue.
What's more: As a result of the economic difficulties of the lower quintiles, the camel deposit data for each child indicates that "disadvantaged populations tend not to make another deposit" (ie, beyond what the state entrusted), with only 31% of parents in the lower quintile adding deposits for the benefit of their children, Whereas in the top quintile this is more than twice as high, 65%.
However, the figures show that more than a third of Israeli households who earn below average still deposit across the country for their children, even though the current cost of living is particularly burdensome for them.
Investment House general manager Nimrod Sapir commented that "Treasury data, which indicate a 277% gap in provident fund yields, also support the need to change the default path in the plan to a path that will generate the highest return for children. This is important in the light of the low interest rates currently available in the market, and even in view of the fact that some of the population lacking the financial knowledge to make an informed choice, as it has been presented to the government. "More in Walla! NEWS More in Walla! NEWS
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