--- title: How a New ‘Baby Bonds’ Proposal to Give Every Child $1,000 at Birth Would Work description: 'A new proposal from Cory Booker and Ayanna Pressley would give families "baby bonds": $1,000 in savings accounts for every newborn child.' authors: - name: Adam Hardy role: Lead Data Reporter url: https://money.com/author/adam-hardy/ bio: Adam Hardy is a lead data journalist at Money, where he frequently reports on financial barriers that affect low-income Americans. Adam’s work has also appeared in Business Insider, Forbes, Nasdaq, The Penny Hoarder, Yahoo! Finance and more than a dozen local and regional newspapers. education: University of South Florida, BA, Magazine Journalism at_money_since: 2021 articles: 497 covers: - Banking - Business - Career Advice - Credit - Credit Cards - Debt - Economy and Politics - Education - Health and Wellness - Housing - Identity Theft - Insurance - Investing - Lifestyle - Loans - Mortgages - Personal Finance - Pets - Professional Services - Retirement - Shopping - Taxes - Technology also_seen_in: - The Penny Hoarder - Forbes Advisor - Creative Loafing - The New York Times - The Washington Post - Bloomberg - Harvard Law School - The Federal Register - National Consumer Law Center - CBS News - Becker's Hospital Review - Business Insider - Mother Jones - The Week - Fortune - The Philadelphia Inquirer - National Association of Student Financial Aid Administrators (NAFSAA) - Education Advisory Board (EAB) - The Institute for College Access & Success (TICAS) - This Morning with Gordon Deal - Empower - Reddit social: - https://www.x.com/hardyjournalism - https://www.linkedin.com/in/hardyjournalism/ editors: - name: Brad Tuttle role: Senior Editor url: https://money.com/author/brad-tuttle/ bio: Brad Tuttle is a former senior editor at Money with over 10 years’ experience covering a vast number of personal finance topics, including careers, cars, travel, budgeting, investing, insurance, credit cards, consumer psychology, real estate, banking, and shopping and deals. education: Columbia University School of Journalism, MS at_money_since: 2014 articles: 366 covers: - Banking - Business - Career Advice - Credit - Credit Cards - Economy and Politics - Education - Health and Wellness - Housing - Identity Theft - Insurance - Investing - Lifestyle - Loans - Mortgages - Personal Finance - Pets - Professional Services - Retirement - Shopping - Taxes - Technology social: - https://twitter.com/bradrtuttle - https://linkedin.com/in/brad-tuttle-834b225 former_staff: true published: '2023-02-22T20:32:39.000Z' modified: '2024-01-10T14:36:32.000Z' section: Banking tags: - bonds - News - savings accounts word_count: 898 canonical: https://money.com/baby-bonds-1000-dollars-every-child/ type: NewsArticle source: structured-blocks --- > **Disclosure:** We may earn a fee if you click on the links below. Compensation does not determine ranking. Not all brands are included. [Learn more](https://money.com/page/disclaimer/). ![Collage of Baby, Baby bottle, and dollar](https://img.money.com/2023/02/News-babybond.jpg) Some lawmakers want to give a $1,000 gift to every family that welcomes a baby. A proposal that would give every American child $1,000 at birth — plus additional yearly payments for lower-income families — is once again gaining attention after progressive lawmakers recently reintroduced a bill in the House of Representatives and the Senate. ## How 'baby bonds' would work The proposal is commonly referred to as “baby bonds,” though the legislation is officially titled the [American Opportunity Accounts Act](https://pressley.house.gov/wp-content/uploads/2023/02/Baby-Bonds-Bill-Text.pdf). The act was introduced into the House and Senate last week by Rep. Ayanna Pressley, D-Mass and Sen. Cory Booker, D-N.J. - The American Opportunity Accounts Act would provide $1,000 to every American child at birth in a federally-funded, interest-bearing [savings account](https://money.com/best-savings-accounts/). - Each year, families would receive an additional deposit into the account depending on their income. High-income earners would receive no additional deposit while families that earn below the poverty line would receive $2,000 per year. - Under the proposal, a child growing up in a household below the poverty line would have an estimated account balance of $46,215 by 18. - At 18, the account holder could use the funds for certain wealth-building activities like [buying a home](https://money.com/how-to-buy-a-house/), [paying for college](https://money.com/how-to-pay-for-college/), [starting a business](https://money.com/how-to-start-a-business/) or [saving for retirement](https://money.com/save-for-retirement/). There are no restrictions on the funds once the recipient turns 59.5 years old. “Baby Bonds are one of the most effective tools we have for closing the racial wealth gap and breaking the cycles of poverty and trauma that have prevented Black and brown folks from thriving in this country,” Rep. Pressley said in an [announcement of the proposal](https://pressley.house.gov/2023/02/15/pressley-booker-re-introduce-bicameral-baby-bonds-legislation-to-tackle-wealth-inequality/), “so it is no surprise that this idea has gained traction in states across the country.” Sen. Booker first introduced the proposal in 2018, then again with Rep. Pressley in 2021, kickstarting a wave of interest at a state and local level. - According to the left-leaning nonprofit [Urban Institute](https://www.urban.org/research/publication/state-baby-bonds), Connecticut, Washington, D.C. and California currently have similar policies in effect, but they aren't universally available. In [D.C.](https://dccouncil.gov/1000-a-year-baby-bonds-created-by-the-council/), for example, the local government provides a $500 baby bond account at birth to low-income families plus an annual deposit of up to $1,000 to families who remain within 300% of the poverty line. - Additionally, state lawmakers have introduced baby bond legislation in Delaware, Iowa, New Jersey, New York, Washington, Nevada, Wisconsin and Massachusetts. ## What the research says The American Opportunity Accounts Act is aimed at reducing the [racial wealth gap](https://money.com/wealth-gap-race-economic-justice/), though the initial $1,000 would be universal and the supplemental deposits each year would based on income levels — not race. - While the racial wealth divide has shrunk considerably since the abolishment of slavery nearly 160 years ago, a wide gap persists, according to the [Federal Reserve Bank of Minneapolis](https://www.minneapolisfed.org/article/2022/how-the-racial-wealth-gap-has-evolved-and-why-it-persists). - In 1870, the wealth gap between Black and White Americans was 23 to 1, the Minneapolis Fed says. By 2019, the gap has narrowed to 6 to 1. - In other words, the average wealth of white Americans in 2019 was $338,093 while the average wealth for Black Americans was $60,126. While every child would qualify for an initial $1,000 at birth, the baby bond program would address the racial wealth gap by providing supplemental payments each year to financially needy families, up to $2,000. “Because of the racialized nature of wealth distribution in the US, targeting resources toward children from households with the least resources disproportionately benefits children from Black, Latinx and Indigenous households,” according to a [report](https://prosperitynow.org/sites/default/files/PDFs/Baby%20Bonds/Frequently%20Asked%20Questions%20about%20Baby%20Bonds.pdf) by Shira Markoff, a policy fellow at the pro-baby bond advocacy group Prosperity Now. - Estimates from the offices of Rep. Pressley and Sen. Booker suggest their proposal would, on average, benefit Black and Latinx children more than white children. - By the age of 18, the average account for a Black child would accrue $29,800, a Latinx child would accrue $22,300, and a white child would accrue $11,690. Democrats in favor of the baby bond accounts also say the program would pay for itself “by making common sense reforms to federal estate and inheritance taxes, including restoring the estate tax to 2009 levels.” That claim is buttressed by a budget analysis from the fiscally conservative [Committee for a Responsible Federal Budget](https://www.crfb.org/blogs/cory-bookers-baby-bonds-plan) (CRFB). - Shortly after the proposal was first introduced, the CRFB found in 2019 that the program would cost $650 billion over a decade. - By increasing the tax rate on capital gains and dividends to 28% as well as increasing estate taxes, the plan would raise $700 billion in tax revenue over 10 years to more than offset its cost. ## Keep in mind The American Opportunity Accounts Act would be a massive overhaul of our tax and social safety net programs, and the proposal is not likely to become law during this Congressional session due to a Republican majority in the House of Representatives. Some Republican representatives do want major tax reform. However, they're far apart on the minutiae. Take the [recently proposed Fair Tax Act](https://money.com/fair-tax-act-national-sales-tax/). The proposal aims to abolish the IRS entirely, get rid of all current federal taxes and establish an estimated 30% nationwide sales tax — a move that the left-leaning Brookings Institution expects would increase the tax burden on the bottom 90% of earners. ```json { "@context": "https://schema.org", "@graph": [ { "@type": "BreadcrumbList", "@id": "https://money.com/baby-bonds-1000-dollars-every-child/#breadcrumb", "itemListElement": [ { "@type": "ListItem", "position": 1, "name": "Home", "item": "https://money.com" }, { "@type": "ListItem", "position": 2, "name": "Banking", "item": "https://money.com/banking/" }, { "@type": "ListItem", "position": 3, "name": "Savings Accounts", "item": "https://money.com/savings-accounts/" }, { "@type": "ListItem", "position": 4, "name": "How a New ‘Baby Bonds’ Proposal to Give Every Child $1,000 at Birth Would Work" } ] }, { "@type": "WebSite", "@id": "https://money.com/#website", "url": "https://money.com", "name": "Money", "publisher": { "@id": "https://money.com/#organization" } }, { "@type": "WebPage", "@id": "https://money.com/baby-bonds-1000-dollars-every-child/#webpage", "url": "https://money.com/baby-bonds-1000-dollars-every-child/", "name": "How a New ‘Baby Bonds’ Proposal to Give Every Child $1,000 at Birth Would Work", "isPartOf": { "@id": "https://money.com/#website" }, "datePublished": "2023-02-22T20:32:39.000Z", "mainEntity": { "@id": "https://money.com/baby-bonds-1000-dollars-every-child/" }, "inLanguage": "en-US", "breadcrumb": { "@id": "https://money.com/baby-bonds-1000-dollars-every-child/#breadcrumb" }, "dateModified": "2024-01-10T14:36:32.000Z" }, { "@type": "NewsArticle", "headline": "How a New ‘Baby Bonds’ Proposal to Give Every Child $1,000 at Birth Would Work", "articleSection": "Banking", "image": [ { "@type": "ImageObject", "url": "https://img.money.com/2023/02/News-babybond.jpg", "width": 2880, "height": 1920, "caption": "News-babybond" } ], "author": [ { "@type": "Person", "name": "Adam Hardy", "url": "https://money.com/author/adam-hardy/", "@id": "https://money.com/author/adam-hardy/#author", "description": "Adam Hardy is a lead data journalist at Money, where he frequently reports on financial barriers that affect low-income Americans. 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