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 guaranteed returns with no market risk.
Bank Fixed Deposits (Pikdonot)
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.
In a high interest rate environment (which Israel has experienced since 2022), pikdonot became significantly more attractive. As of early 2025, short-term shekel deposits were offering 4-5% annualized rates at major banks — considerably better than the near-zero rates of the 2010s.
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 earned is subject to 15% withholding tax (nikui bamakor), which the bank deducts automatically. No separate filing needed for simple bank interest.
Comparing Rates and Negotiating
Published rates at major banks are typically not the best available. Particularly for deposits above 50,000-100,000 NIS, banks will often offer improved rates to retain the business. Call or visit the branch and ask specifically: "What is your best rate for a [term] pikadon on [amount]?"
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: Bituach Leumi deposits 50 NIS per month for every eligible child automatically (as of 2025 rates)
- Parent top-up option: Parents can add an additional 50 NIS per month, which the government matches with a further 50 NIS (making the parent's 50 NIS worth 100 NIS total with the match)
- 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).
- Access: The account matures at age 18. The child can withdraw the balance, keep it invested, or roll it into other savings vehicles.
- Tax treatment: Growth is tax-advantaged similar to other provident funds.
Maximizing the Children's Account
The parent top-up with the government match is essentially free money — 100 NIS/month into your child's account at a cost of 50 NIS to you. If you can afford it, enrolling in the top-up option from birth is one of the simplest financial decisions you can make for your children.
Over 18 years at a moderate 5% annual return, the total government contributions (50 NIS/ month for 216 months) grow to approximately 28,000 NIS with no parent contribution at all. With the parent top-up and match (100 NIS/month total from both parent and government match, plus the base 50 NIS), the balance at 18 approaches 75,000-80,000 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.