More Cities Are Focusing on Wealth-Building at an Early Age
Some don’t believe childhood savings programs go far enough to address systemic inequality.
“From my perspective, the savings account proposals, for the most part, the ones that would give each child the same amount, don’t even begin to address the issue of wealth inequality,” says Prof. William “Sandy” Darity of Duke University.
Instead, Darity and his colleague, New School Researcher Darrick Hamilton, propose a federal Young Adult Trust Fund Program, or “baby bonds” as it is becoming known. The goal of this program would be to address the United States’ dramatic racial wealth gap. Research by Darity and others shows that white families living near the poverty line still have roughly $18,000 in wealth, black families in similar circumstances have none. The research says that while income differences stem from the workplace, “wealth is built primarily by the transfer of resources across generations.”
Further, about many childhood savings accounts that focus on saving for college, Darity notes that post-secondary education doesn’t guarantee a shift in wealth status for black families.
While still focused on wealth at an early age, the baby bonds idea wouldn’t technically be a program to encourage families to save.
“We don’t want parents or relatives involved in the funding of this account. It would be publicly funded in its entirety,” says Darity.
The amount that would be initially put into each child’s trust fund, ideally at birth, would be dictated by the family’s wealth position, Darity explains. So, like San Francisco’s childhood savings account program, their proposed young adult trust fund program would be a universal program — but unlike San Francisco’s, it wouldn’t be uniform. The children of wealthiest parents would get what many childhood savings account programs provide today — just a $50 initial deposit. Meanwhile, children born in to the least wealthiest families would get something closer to an initial deposit of $50,000 or even higher. All “baby bond” accounts, regardless of initial size, would be guaranteed an interest rate of at least one percent.
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