- Democrats released a report highlighting the benefits of "Baby Bonds," which are trust funds given to kids at birth.
- The report said that the funds would help Americans build wealth over a lifetime.
Giving babies their own bank accounts is good for the whole economy, a new report finds — and it could give Americans a big leg up on wealth building.
On Wednesday, the Joint Economic Committee — led by Democratic Rep. Don Beyer — released a report on the benefits of "Baby Bonds." These are bank accounts provided by the federal government to children at birth with a certain amount of money that would be supplemented each year based on household income. When the child reaches adulthood, per the report, they will have access to the funds to use on major expenses like higher education, buying a home, or starting a business, all of which the report says would help build wealth later in life.
"The transition to adulthood is a challenging time for everyone. Ensuring that children can enter this defining stage of life with a nest egg would open up a world of possibilities and provide new pathways to building wealth," Beyer said in a statement. "And the positive effects of Baby Bonds are not limited to only the children and families who directly benefit from these accounts: When young adults can pursue education, start businesses and buy homes, it creates economy-wide benefits."
As the report said, giving people increased opportunities to pursue a higher education "can directly increase their lifetime earnings."
Even small savings would have a significant impact — a 2013 study from the Center for Social Development at Washington University in St. Louis found that having a savings accounts containing less than $500 tripled the likelihood of a student attending college and increased the likelihood that student would graduate 4.5 times more than someone that did not have a savings account.
Currently, high tuition prices are not only keeping some people from enrolling in college in the first place — those who do enroll can end up borrowing much more debt than they can afford to pay off, keeping them trapped in a cycle of repayment. While President Joe Biden in August announced a plan to forgive up to $20,000 in student debt for federal borrowers, it is currently held up in court, and it is not a permanent solution to address college affordability issues going forward.
As Insider previously reported, reforms to address surging college costs, like being more transparent with college pricing and investing in aid to low-income students through Pell Grants, would help increase college access. Baby Bonds could be a part of that.
In addition, as the report said, the bonds could be used as seed money to start a business. It would put homeownership more into reach by helping with down payments, and purchasing a home sooner in life will lead to a greater return on the initial investment as the value of the house increases over time.
New Jersey Sen. Cory Booker unveiled a plan last year that would provide every American child with a $1,000 savings account that can be accessed when they turn 18, with additional deposits of up to $2,000 each year, depending on income. Children from lower-income families would receive larger payments, and the proposal would cost $60 billion a year.
While the policy has not yet been adopted on a federal level, some states have taken matters into their own hands — Oklahoma, Maine, Pennsylvania, and Illinois are among a number of states who have developed their own programs to kickstart Americans' wealth at birth.
Still, the policy has faced some conservative pushback. Rachel Greszler, a research fellow in economics at the Heritage Foundation, previously told The Washington Post that if people receive Baby Bonds, "you might have less incentive to save, less incentive to get an education, knowing that this account is sitting there."
But Booker, Beyer, and proponents of the policy believe it will give everyone a fair shot at building wealth.
"Baby Bonds are also powerful tools for reducing economic inequities by providing disadvantaged children with seed money to build a more promising future for themselves and future generations," Beyer said. "These kinds of investments would be an important step toward promoting an economy that works for all—not just the wealthiest few."