Why Baby Bonds, Why Now?

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 ten 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.

This piece was developed in collaboration with The New School’s Institute on Race, Power and Political Economy, and is also available on their website.



Ana Hernandez Kent, Lowell R. Ricketts. “The State of US Wealth Inequality.” Federal Reserve Bank of St. Louis. October 2023.


Congressional Budget Office. “Trends in the Distribution of Family Wealth, 1989 to 2019.” September 2022.


Karl Russell. “The Greatest Wealth Transfer in History is Here, with Familiar (Rich) Winners.” May 2023.


Neil Bhutta, Andrew C. Chang, Lisa J. Dettling, Joanne W. Hsu. “Disparities in Wealth by Race and Ethnicity in the 2019 Survey of Consumer Finances.” Board of Governors of Federal Reserve. September 2020.


Samantha Atherton, Madeline Brown. “Early-Life Wealth-Building Programs Could Narrow the Wealth Gap, But Their Success Hinges on Public Support.” Urban Institute. August 2023.


Margaret M. Clancy, Sondra G. Beverly, Mark Schreiner, Jin Huang, Michael Sherraden. “Financial Outcomes in a Child Development Account Experiment: Full Inclusion, Success Regardless of Race or Income, and Investment Growth for All.” Brown School at Washington University. March 2021.


Jah’l Selassie. “Can $50 Really Put A Student On The Road To College?” Forbes. July 2023.


Madeline Brown, Marokey Sawo, Ofronama Biu. “Baby Bonds Would Reduce Racial Wealth Inequities. Here’s What Policymakers Need to Know.” Urban Institute. October 2023.


Madeline Brown, Ofronama Biu, Catherine Harvey, Trina R. Shanks. “The State of Baby Bonds.” Urban Institute. February 2023.