Demographic, Financial, and Motivational Household Characteristics and Participation in the National Child Savings Program in Israel

Background: Child development accounts (CDAs)—savings or investment accounts typically opened for young children with the goal of promoting asset accumulation—have been shown to have positive impacts on multiple household outcomes, including parental educational expectations (Kim et al., 2015) and children’s social-emotional development (Huang et al., 2014), and can potentially promote children’s asset ownership and economic mobility in the future.

Israel’s CDA program, called Savings for Every Child Program (SECP), began in 2017. The program is universal and automatically enrolls all children under the age of 18, depositing 50 shekels per month (approximately $14) into their accounts. Additionally, parents can make several active enrollment choices with regards to their children’s SECP funds: they can transfer an additional monthly 50 shekels from their ongoing child allowance into the SECP accounts, and choose a particular investment vehicle for their children’s deposits. Future benefits from the SECP depend strongly on these choices. This study examines how household demographic, financial, and motivational characteristics predict housheold’s participation in Israel’s CDA program, and emphasizes how the intersection between intrinsic personality traits, financial knowledge, and financial circumstances guides participation decisions.

Data and Methods: Data come from administrative records maintained by Israel’s National Insurance Institute merged with a household survey covering 4,838 SECP-eligible families. The dataset includes information on multiple household demographic, financial, and motivational characteristics, such as ethnicity and religion, parental employment and educational attainment, financial resources, financial knowledge, and parents’ motivational orientations. We conduct multiple logistic regression analysis to explore how these household characteristics correspond to three SECP-related decisions: active program enrollment, depositing additional funds, and selecting an investment fund or a savings account.

Results: Overall, 79.7% of households actively enrolled in the program; of these, 65.5% selected a higher-interest investment fund and 73.7% chose to deposit additional monthly funds. Regression findings show that household ethnicity and parental education were the strongest predictors of household engagement with the SECP. Namely, compared to Non-Ultra-Orthodox Jews, ethnic minorities—Ultra-Orthodox and Arab Israeli households—were significantly less likely to deposit an additional 50 shekels per month (by 15.8 and 12.3 percentage points, respectively, p<0.001). Additionally, access to liquidity and the presence of additional family savings were strong predictors of households’ financial decisions in the SECP, while intrinsic personality traits and financial knowledge measures were not strong predictors.

Conclusions and Implications: Despite high levels of program participation, disadvantaged and economically vulnerable households tended to engage less with the program, potentially leading to lower asset levels in the future. These results inform potential policy designs of CDA programs, especially in middle-income countries, and have implications for enabling less-educated and ethnic minority households to save for their children’s future.