Why Baby Bonds, Why Now

By Alexandra Cawthorne Gaines and Michael Bonino-Britsch of the JPMorgan Chase PolicyCenter | November 16, 2023

Baby Bonds are an increasingly popular government policy in which every child born into poverty receives a publicly funded trust account at birth, providing them with “start-up capital” to pursue fulfilling, productive, prosperous, and self-directed lives. Follow our Baby Blogs series to learn about the vision, politics, and people behind Baby Bonds and their transformative impact on the lives of young people, their families, and communities.

The wealth gap in the United States is stark.

Over the past three decades total real wealth held by American families has tripled, but that growth has not been uniform: the top 10 percent of households hold 69 percent of total household wealth while the bottom 50 percent of households hold only 2.4 percent.1 Older families and families with more education and higher-incomes saw their wealth rise faster than that of younger families and families with less income and less education.2 The wealth gap could grow even wider and at a faster pace in the next 20 years as wealth transfers from Boomers to Gen X and Millennials. By 2043, approximately 84 trillion dollars is expected to change hands with the majority remaining within a small circle.3

For young people, especially those with fewer economic resources, the lack of financial stability and wealth can delay home ownership, educational attainment, and family formation. This is especially true of households of color; white family wealth in 2019 was eight times that of an average Black family and five times that of an average Hispanic family.4 These widening gaps require solutions. 

Today, states like Connecticut and California and the District of Columbia are working with academics, non-profits, and private sector actors in healthcare and housing to leverage historic government investments in early life wealth building.5 Baby Bonds are one of several strategies that can help young people from low-income and low-wealth families access “start-up capital for life,” providing meaningful amounts of money that they can later use to purchase assets or make investments.  

The opportunity to make progress in addressing wealth gaps has been decades in the making. Academics have been studying the impact of early childhood wealth building accounts for the last 20 years. Studies in Oklahoma and San Francisco have created an evidence base of what happens when under-resourced children are provided start-up capital for life.6 Researchers have found that even a modestly-funded college saving account, such as a 529, increases the likelihood that young people will enroll in a postsecondary institution.7

Working off that intellectual underpinning, other academics have proposed Baby Bonds as a targeted policy solution for children from households with the least wealth, helping recipients of the funds make purchases as adults that will grow in value and help build economic security and wealth over their lifetimes.8 This includes attending postsecondary education, investing in retirement, starting a small business, or purchasing a home.

The transformational potential of these programs has inspired numerous savings pilots in cities and state across the country. Policymakers in California, Connecticut, and Washington D.C. are implementing large-scale Baby Bonds initiatives, inspiring legislators in several other states to propose Baby Bonds legislation.9 State Baby Bonds initiatives have the potential to transform economic outcomes for children from low-wealth families and low wealth communities.

Baby Bonds are a part of a holistic suite of policies that can help people achieve short-term financial stability and long-term financial success while closing wealth gaps. There is also a need for more policymaker and private sector collaboration that creates pathways for underserved families and communities to access appropriate financial products including savings, credit, insurance, and investment instruments that help protect and build wealth. Government, the private sector, and non-profit organizations should come together to advance Baby Bond initiatives, a data-driven public policy solution that helps narrow the wealth gap and support a more inclusive economy.

Alexandra Cawthorne Gaines is the Executive Director for Financial Health and Wealth Creation for the JPMorgan Chase PolicyCenter. In this capacity, she works with colleagues to leverage the firm’s subject matter expertise, data assets and business insights to identify and develop policy proposals and strategies that drive inclusive economic growth and reduce barriers to mobility. Before coming to JPMorgan Chase, Alexandra served as vice president of the Poverty to Prosperity Program at the Center for American Progress (CAP), where she oversaw the development of policy and advocacy strategies to reduce poverty.

Michael Bonino-Britsch is the Policy Associate for Financial Health and Wealth Creation for the JPMorgan Chase PolicyCenter. Michael comes to JPMorgan Chase from Deloitte where he supported clients in the Medicaid policy space. His original policy focus has always been economic security; he has worked at the state and local level on the intersection of workforce development, economic development, and human services policy and practice. He earned a Master of Public Affairs from the University of Wisconsin- Madison in 2017. Michael hails from Los Angeles, CA and currently lives in Milwaukee, WI.

If you missed previous installments of our Baby Blogs series, read them here

To share feedback on this blog, or for questions about Baby Bonds, email David Radcliffe at [email protected].

To learn more, explore our Baby Bonds resources.