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Saving for the children

Effective financial education must accompany Israel's Savings for Every Child, or the 23K NIS gift will go to waste

Ask a young person 21-years-old: What would you do if I handed you 23,000 NIS in cash?

It is likely that many would take the opportunity to buy a new iPhone or a larger TV screen, travel abroad or go on a shopping spree at the mall.

Around the world, winners of large sums of cash at lotteries, often spend all the money and are left destitute in a short time.

The Ministry of Finance initiated a savings scheme costing close to 2 billion NIS per year, in order that a sum of money will be available to every young person when they reach ages 18 or 21, with no strings attached as to how to spend the money.

This follows the recommendation of MK Eli Elalouf’s poverty report and the desire to promote equal opportunities for all young Israelis when they enter adulthood.

In my view, there are two possible scenarios as a result of this plan:

In the first scenario, businesses whose customers are young people, will increase their marketing efforts, knowing that this target group is going to have a nice sum of cash available. Companies selling electronic gadgets, clothes, trips, entertainments, fast food, cosmetics and all the stuff that young people love, will embark on intensive campaigns to sell their products to the recipients of the “savings” money.

Some of the young people will discover new and exciting experiences, for example whoever used to sleep in a sleeping bag on a riverbank in Thailand will now be able to treat himself to a 5-star hotel. Whoever used to travel around South America on buses before the “savings” scheme, will now be able to rent himself a car, etc., etc.

Some will now be able to better fulfil their romantic dreams, and invite 600 guests to their wedding instead of the pre-“savings” list of 500 invitees.

And some, who up till now lived in circumstances of poverty and restrictiveness, will finally be enabled to have a serious shopping expedition at the mall, buying the brand names and sparkling accessories which they have always longed for and which contain the key for acceptance in privileged society.

In the second scenario, the young people and their parents will learn first-hand the value of long-term savings. They will see how the dividends increase over the years, and that money put away creates passive income. Based on this experience, instead of withdrawing the money at aged 18 or 21, the young people will continue to invest it and will even add to the savings, in order to attain a stable future and a financially sustainable adult life.

How can we cause this scenario to happen?  Without a doubt, the desired outcome will not take place without financial education.

It is impossible to instill such revolutionary habits without education and training to internalize the change in behavior from spending to saving.

Before giving them this cash handout, the young people must receive tools in financial literacy, such as how to create and live by a budget, define and achieve goals, prioritize “needs” over “wants”, understand bank and credit card statements, and so on.

Effective financial education is more than giving over facts and figures; it also entails providing role models to inspire and be a living example of financial responsibility.

This education is necessary in order to migrate from a lifestyle of buying whatever we want without planning and paying a heavy price later, to responsible behavior and long-term financial well-being.

The Elalouf Commission recommends financial education to accompany the Savings for Every Child plan.

We hope that this recommendation will be implemented in order that the government’s investment does not land up in the tills of high fashion boutiques and sushi bars, but is directed towards real inculcation of lifelong good habits of saving money from a young age.

About the Author
Mindy (Wenner) Ajzner is the founder and CEO of Chaim BePlus, a nation-wide non-profit organization teaching courses in financial education to high school students and Sherut Leumi girls. She made aliya from Toronto, Canada and has a B.Ed. and M.A. in Jewish Studies and a Senior Bookkeeping Diploma. Mindy lives in Ra'anana.
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