It's likely that a child, grandchild, niece, or nephew working a summer job won't earn a fortune. However, as a parent, grandparent, aunt, or uncle, you have a golden opportunity to launch their first significant savings plan. One potential financial instrument to consider is an investment savings account known as Kupat Gemel L'Hashkaa
Saving $2,740 annually for 50 years could accumulate to over $1.1 million, assuming an average annual return of 7%. Similarly, saving $6,849 annually for 40 years could grow to slightly more than $1.92 million with the same assumed return. Tax implications should also be taken into account.
Presenting these figures to those we want to save with or for is an excellent starting point for a conversation on the subject. Consider whether you can assist someone in saving through such financial instruments. While you could save the entire amount, the preference should be for participation from those for whom you're saving.
This is an excellent gift with a positive educational legacy. It's certainly possible (and easier for the younger generation) to run simulations showing the financial results of starting to save at a young age on the amounts that will accumulate, as well as the sensitivity of savings to differences in returns.
Take this opportunity to explain the difference between saving and investing, and how investing is for long-term goals. You can also try to explain how to manage investment policy as a function of the investment horizon (a longer horizon allows for higher risk-taking), and how to behave in bear market situations.
Isralei investment savings accounts known as Kupat Gemel L'Hashka'a are an alternative for this type of saving. The amount invested in them in Israel stands at more than $6.85 billion. There's a deposit ceiling, tax benefits, the option to choose an investment track, and the ability to transfer savings between tracks with the same manager or between managers. Thoroughly examining the subject and consulting experts for decision-making are certainly necessary steps.
This should not be seen as a substitute for investment advice and tax advice
