Low-Risk Savings: The Basics
Not all savings need to be invested in volatile markets. For emergency funds, near-term goals, or simply money you cannot afford to risk, low-risk savings options are essential. Israel offers two main categories: bank fixed deposits (pikdonot) and government savings bonds (mamlachtiot). Both provide a fixed interest rate without exposure to equity-market volatility, though credit and inflation risk still apply.
What is a bank fixed deposit (pikadon) in Israel?
A פיקדון בנקאי (Pikdon Bankai) is a term deposit where you lock your money with a bank for a set period - typically 1 month to 5 years - in exchange for a guaranteed ריבית (Ribit) (interest rate). The rate is fixed at the time of deposit and does not fluctuate with the market.
Do not carry a remembered rate into the branch. Deposit rates move with the Bank of Israel rate and differ by bank, term and amount, and the Bank of Israel publishes a bank-by-bank comparison of deposit interest for exactly this reason. Its own guidance on that page is to compare the accompanying terms and the risk level of each track as well as the headline rate, and not to hesitate to negotiate.
Key terms to understand:
- Term (tekufa): The lock-up period - 1 month, 3 months, 6 months, 1 year, or longer. Longer terms sometimes offer better rates, but you lose flexibility.
- Early redemption: Breaking a pikadon early typically incurs a penalty - usually forfeiting some or all of the accrued interest. Some banks offer "flexible" or "daily" pikdonot that allow early exit with a small rate reduction.
- Renewal: Most banks auto-renew pikdonot at maturity at the prevailing rate. Set a calendar reminder to review at maturity - rates change.
- Tax: Interest on a deposit is taxed at 15% or at 25%, depending on whether the deposit is index-linked, and the bank deducts it at source. No separate filing is needed for simple bank interest.
How do you compare pikadon rates and negotiate a better one?
Published rates are a starting point, not the offer. Start from the Bank of Israel deposits comparison page to see what different banks quote for your amount and term, then call or visit and ask specifically: "What is your best rate for a [term] pikadon on [amount]?" The Bank of Israel itself tells savers to negotiate.
Online banks and postal bank (DO'AR Israel / Postal Bank) sometimes offer better rates than the traditional banks, particularly for standardized short-term deposits. Compare before committing.
Gemel Yeladim: Children's Savings Account
Every child born in Israel - or who made aliyah as a child - receives a government savings account called גמל ילדים (Gemel Yeladim). This is also known as "Chalon Hayeled" (the Child's Window) or the National Insurance children's savings plan.
How it works:
- Government contribution: National Insurance deposits NIS 58 per month for every child eligible for a child allowance, as of 1 January 2026. The plan launched in January 2017, covering children for whom a child allowance was paid from May 2015 onwards, and every child born after January 2017
- Parent top-up option: Parents can double the deposit by diverting an equal 58 NIS per month from their cash child allowance (Kitzvat Yeladim) into the account, bringing the total to 116 NIS per month. There is no separate government match on top of this; the extra 58 NIS comes out of the allowance you would otherwise receive in cash
- Investment: Contributions are held in a Kupat Gemel managed by the selected fund manager. Parents choose the investment track (or accept the default moderate track).
- Grants: Children born from 1.1.2017 receive a grant of NIS 291 at age 3 and NIS 291 at bar or bat mitzvah; children born before that date receive NIS 582 at 18. Anyone who has not withdrawn by 21 receives a further NIS 582. National Insurance also pays the management fees until the child turns 21, after which they come out of the account.
- Access: Deposits run until the child's 18th birthday, and the child can then withdraw the balance or leave it invested.
- Tax treatment: This is the point most parents get wrong. Withdrawal is subject to capital gains tax. The one exception National Insurance names is a child who leaves the money in a provident fund for investment until retirement age and then takes it as an allowance, which is free of capital gains tax.
How do you maximize your child's Gemel Yeladim account?
The parent top-up doubles the monthly amount being saved - from 58 NIS to 116 NIS per month - at the cost of redirecting an equal 58 NIS from the cash child allowance into the locked savings account. It is not free money or a matched contribution; it is a choice between receiving that 58 NIS as cash now or having it invested until the child turns 18.
Over 18 years at a moderate 5% annual return, the base government contribution alone (58 NIS/ month for 216 months) grows to roughly 20,000 NIS with no parent action at all. With the top-up doubling the monthly deposit to 116 NIS, the balance at 18 reaches approximately 40,000 NIS - a meaningful start to a young adult's financial life.
To activate the top-up and choose your preferred fund manager, contact Bituach Leumi with your child's details and your chosen fund manager's information. The default fund manager and track are assigned automatically - but like all Israeli savings products, choosing a low-fee manager is worth the one-time administrative effort.
An Israeli pikadon is a bank term deposit that pays a rate fixed at the time of deposit rather than tracking the markets. The rate differs by bank, term and amount, so compare on the Bank of Israel deposits page and negotiate; interest is taxed at 15% or 25% depending on whether the deposit is index-linked, deducted at source. The savings plan for each child is a separate National Insurance account: as of 1 January 2026 it deposits NIS 58 a month per child eligible for a child allowance, and parents can double it to NIS 116 by diverting an equal NIS 58 from the allowance, with no separate government match. Grants are added along the way, National Insurance pays the management fees until age 21, and withdrawal is subject to capital gains tax.
The rate is fixed at the time of deposit, but it is set per bank, per term and per amount, and it moves with the Bank of Israel rate. Rather than assume a range, use the Bank of Israel deposits comparison page to see what different banks quote for your amount and term. The Bank of Israel also tells savers to compare the accompanying terms and the risk level of each track, and to negotiate rather than accept the published rate.
Interest is subject to a 15% withholding tax (nikui bamakor) that the bank deducts automatically at source. No separate filing is needed for simple bank interest. US taxpayers should note Israeli bank balances are reportable on FBAR above 10,000 dollars and the interest is reportable on a US return.
As of 2026, Bituach Leumi deposits NIS 58 per month per eligible child automatically. The amount is indexed to the Consumer Price Index and has risen from the NIS 50 level when the program launched in 2017 (it was frozen at NIS 57 for 2025). This base deposit happens regardless of family income or whether parents take any action.
No. There is no separate government match. The top-up doubles the monthly deposit from NIS 58 to NIS 116 by diverting an equal NIS 58 from your cash child allowance (Kitzvat Yeladim) into the savings account. The trade-off is receiving that NIS 58 as cash now versus having it invested and locked until the child turns 18.
The account becomes available as a lump sum when the child turns 18. At that point the balance can be withdrawn, left invested, or rolled into another savings vehicle. Because the horizon is long, an equity-heavy investment track gives growth more time to compound, while a child close to 18 may suit a more conservative track.