The State of Baby Bonds

Baby bonds are universal, publicly funded child trust accounts. When recipients reach adulthood, they can use the funds for wealth-building activities such as purchasing a home, investing in education, or starting a small business. Baby bonds are intended to decrease wealth inequities—and specifically close racial wealth disparities, given that Black, Latinx, and Indigenous children are more likely to belong to lower-wealth households as a result of structural racism. As of February 2023, baby bonds proposals have passed in Washington, DC, Connecticut, and California and been introduced at the federal level and in eight additional states. In this brief, we revisit the policy as originally proposed, provide a legislative update, and outline six design features that would help baby bonds deliver on the promise of reducing racial wealth inequities: (1) universal eligibility and automatic enrollment, (2) financial progressivity, (3) flexible use of funds, (4) public funding, (5) substantial endowments, and (6) individual account holders.