The cost of living crisis in Israel has reached new heights in 2025. “Prices for everything are constantly rising,” Inbar, a 28-year-old special education teacher, told Davar. Inbar is pregnant and lives in Jerusalem with her partner, a university student and a reserve soldier. They pair are concerned about making ends meet for their unborn child. Although they’ve gone to lengths to find second-hand items for the baby like clothes and a stroller, the cost of childcare and increased groceries bill is worrying, Inbar said.
Starting on January 1 of the new year, Israel saw significant price hikes across multiple areas of life. Stemming largely from government decisions to support the war budget, Israel’s value-added tax has risen from 17% to 18%, utilities and public transport have gone up, and mandatory payments to National Insurance rates now amount to 1.2% of a worker’s salary, up from 0.4%.
“We’ve made decisions we never had to think about before, like buying things ahead of the price increases, filling the gas tank before the VAT rises,” Inbar said. “My brother told me a few days ago that a consumer boycott is being planned against the big supermarkets. But who will stop shopping there? People will hold out for a day or two. I realized I live in a country where there is no limit to how much prices can rise.”
Families’ Economic Resilience is Diminishing
Like Inbar and her partner, many others are experiencing similar struggles. A representative from Paamonim, an Israeli organization supporting families with financial difficulties, said that the trend is clear.
“We’re seeing an increase in requests, especially from the middle class, people who previously never sought help,” Sharon Levin, the organization’s spokesperson, told Davar. “Last month, we received about 1,000 inquiries—twice as many as we’ve had before. We are focused on providing tailored solutions for this period of war and crisis, but there is so much uncertainty… It's a huge challenge to manage under changing conditions.”
According to Levin, the war has deeply affected Israeli families economically. People from all sectors of Israeli society are seeking Paamon’s services, including business owners who are feeling the pressure of the war economy. Paamonim launched an Economic Resilience Index several years ago to measure the economic health of families, and it has shown a downward trend ever since.
“In many families, one of the spouses has gone into reserve duty. The one who stays at home has to manage both the household and a job,” Levin explained. “People have reduced their working hours or the scope of their employment. This is also the case for freelancers and small business owners. Some have even gotten into debt, taking loans to cover overdrafts, but they didn’t change their financial behavior. They ended up back in overdraft, took out another loan, and entered a vicious cycle of debt that is very, very hard to break out of.”
Paamonim’s work is rooted in mentorship and guidance for struggling families as well as research research. The organization assists more than 13,000 families a year. Half of those families are referred through government ministries, while the other half come to the organization for individual support or through courses and workshops. Activities include courses, lectures, and workshops, both for individuals and for workplaces and community centers, as well as a free budgeting app.
“The tools we provide start with a full review of all their expenses. This means we look at income, expenses, entitlements, assets, savings, and also debt, loans, overdrafts, and so on,” Levin said. This process aims to give families clarity about how much money they are spending on various expenses, and therefore empower them to take more control over their financial lives.
Levin said that the government needs to step up to take care of average people during these difficult economic times. “The cost of living needs to be addressed. Budgets need to be allocated. Families who were evacuated will return home, and people will need to rebuild their houses, both in the south and in the north,” she said. “This has a significant economic aspect that must be taken into account. People will need to repair their B&Bs, workplaces, agriculture, and houses that were damaged. They will need to find employment and support themselves. Without government support, this will not happen effectively.”
“There needs to be sustainable programs with proper funding, and when something good happens, we welcome it,” she continued. “There’s a national financial education program that the Capital Market Authority is supposed to implement, but they haven’t because they don’t have the budget.”
She called on the government to urgently address the cost of living. “It should have been addressed yesterday, not today or tomorrow,” she said. “It’s a crucial part of the country’s recovery.”
This article was translated from Hebrew by Paul Weissfellner.
