Household Savings Decisions in Israel’s Child Savings Program: The Role of Demographic, Financial, and Intrinsic Factors

Abstract

Israel's Child Development Account (CDA) program, the Savings for Every Child Program (SECP), is universal and automatically enrolls all children under the age of 18, depositing approximately $14 into their accounts every month. Parents can transfer an additional monthly $14 into these long-term savings accounts and can choose an investment vehicle for their children's deposits. The total realized benefits from the SECP depend heavily on parents' choices. This study examines how demographic, financial, and intrinsic personality characteristics predict household participation in this program. Using a unique data set combining administrative and survey data, we find that household ethnicity, parental education, and financial circumstances were the most significant predictors of household engagement with the SECP. Important differences in program enrollment and participation are observed by household ethnicity. Our study can inform potential policy designs of CDA programs, especially in middle-and high-income countries, and have implications for enabling less-educated and ethnic minority households to save for their children's future.

Pinching Pennies or Money to Burn?

“…In particular, most of the research that explores savings behaviors focuses on financial capabilities (Sherraden, 2013) and knowledge (Lusardi & Mitchell, 2014), access to savings vehicles (Nam et al, 2013), and broader social and economic factors (e.g., Lunt & Livingstone, 1991). By contrast, a small number of studies have examined broad individual differences, such as personality traits, and their relationship with savings behaviors (Asebedo et al, 2019;Matz et al, 2016;Rosen et al, 2021). For example, Loibl et al (2010) found that psychological dispositionsparticularly future orientationswere associated with savings behaviors among participants in a matched savings program.…”