Child Development Accounts in Israel: Background and Review of Options

Welfare states have in recent years emphasized social investment as a major focus of their activity. Using a variety of tools, these welfare states aim to advance social development, to combat inequality and poverty, and to see their populations prosper. One of the essential means to realize this goal is to increase the material and human capital of all citizens in society. Specifically, in order to ensure that citizens will be able to realize their potential and thereby both improve their own condition and contribute to society, the state must guarantee that young people beginning their adult lives have access to vital systems, including the education and professional training systems, tools for optimal integration into the workforce, and resources to acquire housing and start families.

In the current Israeli reality, thousands of young adults who complete their high school education and/or military or national service must begin their adult lives without sufficient resources to fulfill their maximum potential. Child development accounts, based on a government-individual partnership, are one way to address this reality. These programs seek to ensure that every young adult has the basic financial resources to integrate optimally into society and the economy.

The idea of savings accounts for children has been implemented in various countries for more than a decade, and, in recent years, has also been under discussion in Israel. The legal basis for adopting such a plan was recently included in the Economic Arrangements Law. This policy brief will examine four different options for child development accounts and show the social and budgetary implications of each option.