Massachusetts Latest State to Propose Baby Bonds

by | Feb 7, 2024 | Children |

The state of Massachusetts is considering launching a government program that would invest in every child at birth, according to the Boston Globe.

Called “baby bonds,” the groundbreaking proposal would create a savings account for every eligible child. Upon reaching 18 years old, each recipient would gain access to the account and be able to use the funds as they choose, be it to purchase a house, attend university, or any other goal. As it currently stands, the legislation would allow beneficiaries to have their accounts until they turn 35 years old with the expectation that they continue to live, work, or pay taxes within the state.

Connecticut was the first to propose the concept of baby bonds, and the idea has since gained traction in other states, including California, Vermont, and New York. Now, legislators in Massachusetts are pushing this initiative, which would help low-income families and possibly diminish the racial wage gap.

“You have this inequality, but also a state that’s been at the forefront of innovative power-making,” said Darrick Hamilton, an economist who helped devise the baby bonds idea. “It’s a prime place to [implement baby bonds].”

The state commission has estimated that, with an initial deposit of $6,500 in an account, the funds could accumulate to over $15,000 by the time the recipient turns 18 years old, with the possibility of even more growth. Experts predict that roughly 8,000 infants would be eligible per year, costing about $52 million annually. Though the state has yet to determine where the funds will come from, private donors can make financial contributions on top of state financing.

“The persistent racial wealth gap and increased economic inequality present serious risks to the state’s economy,” wrote Treasurer Deborah B. Goldberg in a findings report from 2022. “By creating a Baby Bonds initiative, Massachusetts can address the unique needs of our residents and our economy. The recommendations provided by the Task Force will reach children across the state who suffer from generational poverty,” she later continued. If implemented, Goldberg’s office would oversee the program. The program would also have an advisory panel and community advisory committee, which would oversee a trust fund.

The idea for baby bonds in Massachusetts first arose in 2015 after the Federal Reserve Bank of Boston published its Color of Wealth report, which revealed a stark financial disparity between Black families and white families in the state. According to the publication, Black households had a median net worth of $8, whereas white households maintained a median of $247,500. Additional research uncovered the same discrepancy — Black families in Massachusetts were significantly financially disadvantaged compared to their white counterparts. Baby bonds are an effort to minimize this racial wage gap in the state and challenge cyclical poverty in the United States. If effectively executed, this program has the potential to drastically alter the socioeconomic conditions of thousands of residents within Massachusetts.

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