What did your children's money do last year that was particularly turbulent in the markets?
Yesterday (Tuesday), the Capital Market Authority published the cumulative returns of the provident funds that administer the 'Savings for Every Child' program in which funds are invested for approximately 2 million children.
The program is led by ten management companies of the provident funds, which underwrite approximately NIS 18 billion.
In the test we carried out, in 2023 'savings per child' produced an average weighted return of 11.19% and in the last five years the return percentage was estimated at 32.21%.
As a reminder, the 'savings for every child' program, which was launched for every child who is entitled to a child allowance, the state deposits NIS 57, as of January 2024, every month for the benefit of a savings plan that can be used by the child starting at the age of 18 for any purpose.
At the same time, the child's parents can deposit an additional NIS 57 every month in addition to the state deposit.
Also, beyond the monthly deposits, the state deposits one-time grants of approximately NIS 1,100 that accumulate throughout the entire savings period.
The money can be withdrawn from the age of 18, for medical treatment of the child or upon the child's death, God forbid.
There is great importance in choosing the investment path of the provident fund, when in every company there are three basic investment paths - a path with little risk, a path with medium risk and a path with increased risk, where most of the savings are currently found.
In addition, there are companies that offer a Halacha route, investment avenues that comply with certain kosher rules, intended for the religious Jewish public, as well as companies that manage a Sharia route for the Muslim-religious public.
Saving from a young age, photo: none
One of the interesting data that emerges from the report published by the Capital Market Authority is that a significant part of the funds are in investment routes with low exposure to shares. This is despite the fact that there are many years left until it will be possible to withdraw the money invested in them. Therefore, experts recommend that you consider transferring the funds to an investment route with Greater exposure to stocks All that is required is to submit an application form to the provident fund, and the funds will be transferred to the new investment route within only three business days.
From the analysis of the average returns by route category in 2023, the return on the high-risk route was almost three times higher than the return on the low-risk route.
As evidence, the path with little risk yielded a return of 6.91% in 2023, the path with intermediate risk yielded a return of 9.74%, while the yield of the path with increased risk is 17.25%.
Differences in returns between management companies
In the analysis of the returns in each route, it can be seen that there are almost double gaps between the different companies.
The pot that produced the highest return in the route with the increased risk is Analyst with a 22.75 percent return.
In the medium-risk route, the highest return was achieved by Infinity at a rate of 13.75%, and also in the route with little risk, Infinity stars with 10.15%.
The box offices that reached the first and last places in the rate of return, photo: None
According to a senior member of the finance and insurance industry and a member of the finance committee at the Chamber of Insurance Agents, Eyal Siani: "This does not necessarily indicate the quality of investment management, since it is only one year's returns for savings intended for a period of many years. Not many know, but the saved funds can be transferred From one company to another without limit. Over the years there have been very significant differences in the returns generated by the funds, which lead to considerable gaps between them. All that is required is to submit an application to the fund you wish to transfer to and it will take care of transferring the funds to it. Of course, it is recommended to consult a professional before making the decision."
Siani added, "Although at first glance you might think that this is a low and negligible amount, a savings plan for each child is expected to yield savings of tens of thousands of NIS for the child over the years. For example, a child born today and NIS 114 will be deposited for him every month, will save about 43 thousand NIS upon arrival to the age of 18 if the annual return is 6%."
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