Child poverty is a growing problem that adversely affects both future society and the poor children themselves. This paper's purpose is to investigate the intergenerational links between education and poverty. Israel serves as an interesting case study because it has exhibited an incremental trend in child poverty between 1980 and 2010 (from 5% to 35%). Regression analyses were conducted to measure the effect of the current generation's features (i.e., education, income, and household investment in education) and of the state's school finance policy on the next generation's cognitive development. These analyses reveal that at the upper secondary school level, the education level, the income level, and the extent of household investment in education of the current generation of students in Hebrew-speaking schools have a high and positive effect on the next generation's cognitive development in terms of high school matriculation eligibility. At the lower secondary level, school finance policy and the education level of the current generation both have a high positive effect on the next generation's cognitive development in terms of academic achievement measured by math scores. In addition, the findings for the Arabic-speaking schools reveal that, at the upper secondary level, the income of the current generation has a high positive effect on the next generation's cognitive development; at the lower secondary school level, the extent of household investment in education of the current generation has a high and positive effect on the next generation's cognitive development. Policy implications are discussed, and a school finance policy reform is suggested as a strategy of breaking through the intergenerational cycle of poverty.