As the famous saying amongst us Olim goes, in order to have a bit of money in Israel, you need to make Aliyah with a lot of money! Indeed for many Olim, especially those at the beginning of their new life and career in Israel, the idea of saving money every month is about as foreign as they are to the natives.
The truth is though, that its not that no one can afford to save every month, but rather its more a case of not knowing how to, what vehicles are available, or my favourite (because it is so wrong) “what’s the point of saving such a small amount a month” or “how little am I going to earn on it anyway?”.
Well, for all of you thinking precisely this, we present you with the 5 Things You Didn’t Know about saving small amounts in Israel (spoiler alert – you should absolutely be saving every month, even small amounts):
1. Automatic – Many savings programs in Israel allow you to set up automatic monthly debits. Just setting it up is the most important thing – the rate of return, fees etc come second.
2. Small Amounts – You will be amazed what small amounts can turn in to over time. For example, saving 50 shekel a month at 0% interest (that’s one Lafa, chips and a drink per month) for 10 years will give you an extra 6,000 Shekel saved up – a short family holiday perhaps. Save 100 shekel per month, and ten years later that’s 12,000 shekel saved, enough to pay a sizeable chunk of the upcoming Bar/Bat Mitzvah. You get the drift.
3. Interest- Bearing Savings - Now that we have passed the psychological barriers of 1) and 2) above, it is important to look at what vehicle you are using for your savings. Most common in Israel (although this is slowly changing) are bank-offered savings programs (Tochniyot Chisachon), which basically pay some negligible interest rate, and give you various exit stations.
4. Mutual Funds – These are also a popular way to save monthly, as mutual funds in Israel have no buy/sell fees, meaning you don’t have the problem of ‘minimum fees’ when buying/selling small amounts of mutual funds. Management fees are high though, and getting advice as to what funds to buy will not be easy unless you have a large portfolio. You can buy these through your bank account.
5. Kupot Gemel and Financial Policies – Looking outside of the banks for saving and investing is becoming ever more popular (as of April 2019, 40bn Shekel left the banks in favor of these savings vehicles during the three preceding years). Provided by the major insurance and investment companies, there are no buy/sell fees here either, and management fees will often be lower than mutual funds. These can also be certain tax benefits through these vehicles, such as tax-deferral and retirement benefits. Search our blog for articles specifically on these vehicles.
The bottom line is, whatever you do, make sure you have some kind of automatic savings program set up – its amazing how it grows. Of course it is worth thinking about the right kind of savings program for you, as with the beauty of compound interest, small differences in rates of return can have large consequences over the long term.
If you would like us to help you set up a monthly savings program, simply Contact Us here and we will get in touch.