Authors:
David Radcliffe, Director of State and Local Policy, The New School Institute on Race, Power and Political Economy
Leah Mayor, Ph.D, Senior Director, Asset Funders Network
Joseph A. Antolín, President and CEO, Asset Funders Network
Our economic systems have tremendous capacity to create opportunity and equity. As it stands, our economy is held back by structural inequities which are deeply embedded in our policies and economy. This creates a system where those born into wealth access a “wealth lottery” that not only impacts financial well-being, but also health, longevity, and pathways to opportunity. We see this from the moment a baby is born, and even before birth, based on the circumstances into which a child is born.
Baby Bonds are a part of a holistic suite of policies that, taken together, can help people achieve short-term financial stability and long-term financial success and close wealth gaps over time.
This brief explains how philanthropy can make a difference through targeted investments that support the foundational case-building and implementation of Baby Bonds at the state and national levels.
What are baby bonds?
Baby Bonds are publicly funded trust accounts given to a child at birth. The funds are invested and grow over time. Once a child reaches adulthood, they can use the funds in defined ways that promote economic opportunity, such as education, small business ownership, and retirement.
Baby Bonds are an increasingly essential bipartisan government policy to address the uneven “wealth lottery,” in which every child born into a low- or median-income household receives a publicly seeded trust account at birth that is invested to increase its value over time. This public account aims to enable recipients to fully participate in the economy despite coming from modest means.
Having access to this “start-up capital” enables young people to build wealth and lead lives that are hopeful, fulfilling, productive, prosperous and self-directed.
The Wealth Gap in the U.S. is Stark
Over the past three decades, total real wealth held by American families has tripled, but that growth has not been uniformly distributed: the top 10% of households hold 69% of total household wealth while the bottom 50% of households hold only 2.4%. Older families and families with more education and higher incomes saw their wealth rise faster than younger families and families with less income and less education. 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 is expected to change hands, with the majority of that wealth remaining within a small circle.
2024 data released by the Federal Reserve Bank of St. Louis, average White family wealth ($1.4 million) was four and a half times that of an average Black family ($311,000) and nearly six times that of an average Hispanic family ($251,000).
Researchers have found that even a modestly funded college savings account, such as a 529, increases the likelihood that young people will enroll in a postsecondary institution.
Baby Bonds are a targeted policy solution that focuses on a substantial endowment, rather than individual savings for children from households with the least wealth.
With the initial funds carefully managed by the state to grow in value, the funds when accessed, would allow beneficiaries to participate in wealth-building economic opportunities in ways similar to those available to people with greater wealth.
State Baby Bonds initiatives have the potential to transform economic outcomes for children from low-wealth families and communities while increasing investment in the state. Because Baby Bonds are designed to focus on asset-building uses, such as education, homeownership, entrepreneurship, or investing in retirement savings, and must be used within the issuing state, these investments in individuals will ripple out and become investments in a state’s economy.
Where Have Baby Bonds Been Established?
- 2021 Connecticut becomes the first state to pass Baby Bond legislation. The state fully funded and implemented the program in 2023.
- 2021 Washington, D.C., establishes a Child Trust Fund, but has not yet finalized implementation or begun enrolling infants.
- 2023 California passes a pilot program providing Baby Bonds to children who lost a primary caregiver due to COVID-19 or have long-term stays in foster care. The state aims to build out a full Baby Bonds program.
- 2024 Vermont and in 2025, Rhode Island passes Baby Bonds legislation, creating the legal framework for the state program and directing the treasurer to implement the program.
The Transformative Power of Baby Bonds
- Provide start-up capital for young people to afford the American dream and true freedom to economically succeed—hard work, education, savings, and job opportunities are not enough.
- Unleash untapped ingenuity, human capacity, and civic engagement in ways that can promote shared prosperity.
- Power local economic growth by strategically deploying resources to historically disinvested communities.
- Reduce public spending on more costly, less effective interventions.
- Reduce student debt and increase wealth, home equity, and retirement savings across gender, race, and ethnicity.
State Baby Bonds in Action: How Policy Becomes Prosperity
Before or shortly after an eligible newborn’s birth, public funds are placed in trust and are carefully invested. Eligibility is determined based on a family’s financial position aligned with state-funded health care (ranging from 185% to 333% of the Federal Poverty line) or tied to geographical median income. These accounts are:
Managed by the State Treasurer
Universal and progressively funded
Automatically enrolled
Available for evidence-based wealth-building activities
Invested to grow over time, multiplying the state’s investment many times over
Protected against impacts on taxes and public benefits
Maintained in an omnibus account to ensure no interruption of eligibility for the household for any other programs
Designed to provide households and beneficiaries with notices of the account’s present value and future uses, supporting aspiration and understanding of their asset
Partner with Treasurers to Build Wealth
State treasurers are natural champions for state-run Baby Bonds because the program aligns with their core responsibilities and offers long-term economic, social, and fiscal benefits. Philanthropy can engage state treasurers as natural partners with shared goals. Here’s why:
✓ Promotes Economic Mobility and Equity
✓ Supports Financial Security
✓ Invests in Human Capital
✓ Stimulates Local Economies
✓ Demonstrates Fiscal Stewardship
✓ Aligns with College Savings and Other Treasury Programs
✓ Demonstrates Public Trust and Leadership
✓ Supports Treasurers’ Focus on the “Big Picture”
8 ways philanthropy can invest and further
the promise of Baby Bonds for Americans
Continue to build the case for systems change
Support research and evaluation
Invest in narrative change efforts
Build momentum and alignment for policy change
Transformative Potential of Baby Bonds on Mental Health
Urban Institute Modeling identified many impacts that Baby Bonds could have on specific communities, including increase in wealth, decrease in student loans, and more equitable homeownership.10 A 2025 research initiative proposed and led by Yale School of Medicine, The New School’s Institute on Race, Power, and Political Economy and The Connecticut Project aims to explore the potential of Baby Bonds to support improved outcomes in mental health and well-being. The qualitative participatory research initiative will assess the health, economic, and social impacts of Baby Bonds.
Building the Field of Wealth Building for Stakeholders
In January 2025, the Asset Funders Network (AFN) and The New School Institute on Race, Power and Political Economy hosted a stakeholder convening called Innovations in Baby Bonds at the New York Federal Reserve Bank, featuring research from Stanford University on how Baby Bonds and direct cash assistance, when paired together, amplify impact. The program brought together nearly 300 stakeholders—leaders in state policy, philanthropy, and nonprofit advocates—to learn together, build a cohesive narrative, and generate support for wealth-building policies.
