Baby bonds are publicly funded trust accounts established for children at birth to provide a financial head start by seeding capital they can invest when they reach adulthood in wealth-building opportunities such as education and homeownership. 

The first baby bonds were introduced in Singapore and the U.K. in the early 2000s. In the U.K., the government established tax-free Child Trust Accounts for babies born between 2002 and 2011, and made an initial deposit to ensure that “all children grow up knowing they have a financial stake in society.” In the United States, where intergenerational wealth affects access to education and healthcare and affects life expectancy, often resulting in lifelong disadvantages for children born into low-income families, baby bonds have been proposed as a financial tool for upward mobility. In 2010, economists William Darity Jr. and Darrick Hamilton proposed providing every child born in the U.S. with a publicly backed financial asset ranging from $500 to $50,000, with the amount inversely related to family income. Under their proposal, children born into the poorest families would be entitled to the largest bonds.

Federal legislation in 2018 led to the creation of several state and local pilot programs. Washington D.C., Connecticut, and Maine were among the early adopters. Today, more than 20 states offer baby bonds to newborns. Early evaluations are promising, with a 2023 survey by the Connecticut Office of the State Treasurer reporting that families aware of the program reported reduced financial anxiety and increased optimism about their children’s futures. Yet only 27% of eligible families knew about the program, underscoring the need for improved outreach.

As the first cohorts of children with baby bonds grow, researchers are closely monitoring long-term effects on educational attainment, homeownership, and overall well-being. Research so far suggests that the psychological benefits of baby bonds may be just as profound as the financial ones. 

The knowledge that a financial asset awaits in adulthood generates a psychological dividend—reducing the effects of chronic financial stress, instilling hope, and fundamentally reshaping how families and young people perceive their futures, says Catherine K. Ettman, assistant professor in the Department of Health Policy and Management at Johns Hopkins Bloomberg School of Public Health. “There is growing evidence that providing assets to young children provides not only a path to wealth building for those children, but can also improve the mental health of their families,” Ettman wrote in 2024.

A 2020 simulation by Professor Naomi Zewde, assistant professor in health policy and management at the UCLA Fielding School of Public Health, found that a federal baby bonds policy could significantly narrow the wealth gap between young white and Black Americans by a factor of 1.4 ($79,143 versus $57,845). 

But there are risks. As with any investment product, baby bonds are subject to market variations and growth is not guaranteed. Linking the amount of the initial government deposit into a newborn’s account to family income could have the unintended effect of incentivizing some parents to underreport their income in order to qualify for more money for their child.

Still, baby bonds have recently gained renewed political attention. A House Republican proposal backed by President Donald Trump would establish $1,000 tax-deferred “Trump Accounts” for every newborn in the U.S. over the next four years. In contrast to earlier baby bond efforts that aimed solely at low-income families, the current proposal expands access across all income levels, provided that at least one parent holds a Social Security number and is authorized to work. Darrick Hamilton, who co-developed the baby bond concept, has criticized the GOP proposal for straying from its core purpose, which he says is to provide a “birthright to capital” for those who need it most. 

by Angelina Choy

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