A Newly Reintroduced 'Baby Bond Bill' Would Give Every U.S. Baby $1,000 at Birth

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  • Newly introduced federal legislation aims to narrow the racial wealth gap and set children up for greater financial success.
  • The American Opportunity Accounts Act would give each U.S. baby a $1,000 federally-funded savings account at birth and would provide lower-income families additional yearly supplemental payments.

A reintroduced "Baby Bond Bill" wants to make it easier for all families to build wealth.

For many families, saving for their child's future while tackling everyday bills and rising living costs can be challenging. Many children start their adult years with minimal or no savings, further impacting the racial wealth gap in the country. But the recently reintroduced American Opportunity Accounts Act could help children be more financially prepared as they enter adulthood and help them build wealth. The proposed legislation aims to narrow the racial wealth gap and provide greater opportunity for all Americans.

The American Opportunity Accounts Act could help many families

Originally introduced in 2021, Congresswoman Ayanna Pressley and Senator Cory Booker have recently reintroduced the American Opportunity Accounts Act. The proposed legislation hopes to make economic opportunities a birthright for every American child. This 'Baby Bond Bill' would create a $1,000 federally-funded savings account for each child at birth.

The funds would be held in an interest-bearing account managed by the Treasury Department and earn around 3% interest. Additional annual deposits would also be made, depending on family income. Lower-income families could qualify for up to $2,000 yearly deposits and supplemental payments would gradually phase out for families with higher income.

A closer look at how supplemental payments would work

Yearly supplemental payment amounts range from $250 to $2,000, depending on household income. For example, a family of four with a household income of less than $25,100 would qualify for a $2,000 annual deposit per child. On the other hand, a family of four with a household income of $81,575 would only receive $250 in yearly payments per child.

At 18, account holders could access the funds for allowable uses, like paying for educational expenses or buying a home. Below are the proposed household income limits for supplemental payment amounts and the estimated account maturity for an 18-year-old:

Income Household income for family of 4 Supplemental payment amount (yearly) Estimated account balance for 18 year old
<100% Federal Poverty Level (FPL) <$25,100 $2,000 $46,215
125% of FPL $31,375 $1,500 $35,081
175% of FPL $43,925 $1,000 $23,948
225% of FPL $56,475 $500 $12,815
325% of FPL $81,575 $250 $7,248
500% of FPL $125,751 $0 $1,681
Data source: Congresswoman Ayanna Pressley's website.

The racial wealth gap continues to be a problem

The racial wealth gap in the U.S. has narrowed over time, but continues to be a concern. Recent data from the Federal Reserve Bank of St. Louis shows that the racial wealth gap is significant. Most Black and Hispanic families are less wealthy than the typical white family. In 2019, the median white family owned about $184,000 in family wealth. However, the median Black family owned $23,000, and the median Hispanic family owned $38,000.

Reduced wealth can impact the personal finance situation of families for a lifetime. U.S. families of color are less likely to own various types of assets when compared to white families. Additionally, Black and Hispanic families tend to have more debt.

State baby bond programs are increasing in popularity

This proposed federal legislation could set many Americans up for greater financial success and help to narrow the wealth gap. But will it ever be signed into law? Only time will tell. In recent years, similar state-level proposed baby bond programs have become popular.

Several U.S. states have introduced legislation, while others have successfully passed such policies. Hopefully, additional states will introduce legislation like this to help families increase their wealth and set their children up for financial success.

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