Last month, Connecticut officials and families celebrated the first babies eligible for the state’s new Baby Bonds program. A first-of-its-kind in the nation, the program will create a nest egg for children born in the state whose births are covered by Medicaid. One down, 49 to go. Ultimately, we need a national Baby Bonds program. Until then, we hope more states follow in Connecticut’s footsteps.
To understand why Baby Bonds programs are needed, imagine a game of Monopoly. Instead of the usual rules where everyone starts out with the same amount of money, one player gets to start with triple the money of everyone else, and they already have deeds to Boardwalk and Park Place before anyone even rolls the dice. Who would want to play such a rigged game?
Unfortunately, that’s the world we live in. Some babies start out way ahead in life just by being born into wealthier families. When they become young adults, their families can support them in getting their financial start in life—like paying for college so they don’t need to take on student debt or contributing to the downpayment on their first home so they can begin building equity at a young age.
Other babies—disproportionately those who are Black, Latine, or Indigenous—are born into families with little or no wealth. When they become young adults, their families can’t give them as much financial help, making it difficult for them to build financial stability and assets.
To see how this plays out on a larger scale, let’s look at wealth distribution in the U.S. As of the beginning of 2023, the wealthiest 10% of households have 69% of the country’s total wealth, while the bottom 50% have just over 2%. The numbers are even starker by race and ethnicity, stemming from centuries of policies and practices that have economically marginalized households of color and impeded their ability to build and maintain wealth. At the median, Black (non-Latine) households and Latine households have only 12 cents and 21 cents, respectively, for every $1 of wealth held by white (non-Latine) households. Disparities persist even when taking education level into account, showing that it isn’t a matter of just getting more education—it’s a systemic issue.
As the old saying goes—it takes money to make money. And since wealth is largely acquired from the previous generation, generations of households of color continue to be locked out of economic opportunity. Without any policy interventions, these disparities will perpetuate and even worsen. So, what do we do?
Baby Bonds help disrupt this cycle. Under Baby Bonds, the government invests money for babies shortly after birth, with the largest amounts for children from households with the least wealth. When the children become adults, they use the funds to purchase assets that grow in value over time, like a home or college education. Providing this start-up money can begin to level the playing field. A 2019 study found that had a national Baby Bonds program been in place during the mid-1990s, by the mid-2010s, the wealth divide among participants would have decreased from white households having about 15.9 times the wealth of Black households to having only 1.4 times the wealth of Black households.
The ultimate goal is a national baby bonds program, like the American Opportunity Accounts Act proposed by U.S. Senator Cory Booker (D-NJ) and U.S. Representative Ayanna Pressley (D-MA-7), since only the federal government has the resources and reach to address the scale of the racial wealth divide. But states don’t need to wait for the federal government to act. State Baby Bonds programs can support children in starting to build financial stability and wealth while also generating momentum toward a federal program. Along with Connecticut, Washington, DC, has already passed Baby Bonds legislation. And state treasurers are spearheading efforts to pass Baby Bonds legislation in other states, including Treasurers Deborah Goldberg in Massachusetts, Mike Pellicciotti in Washington, and Zach Conine in Nevada.
To be clear, state Baby Bonds programs won’t solve all the economic challenges we face in the United States, many of which have been centuries in the making. But Baby Bonds can make a big impact, especially if implemented as part of a suite of policies to address short- and long-term financial insecurity and wealth inequity.
Through Baby Bonds, state leaders have a golden opportunity to ensure all children are equipped with the resources they need to pass “Go” when they become adults and participate in the economy on a level playing field.
Shira Markoff is a Senior Policy Fellow at Prosperity Now, author of Baby Bonds: A Legislative Toolkit for Building a Brighter Future in Your State, and served on the Massachusetts Baby Bonds Task Force convened by Treasurer Deborah Goldberg.