Brief What Do We Know about Baby Bonds?
A Summary of Literature
Madeline Brown, Marokey Sawo, Ofronama Biu
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Baby bonds are publicly funded child trust accounts that target children from low-wealth or low-income families. When the children reach adulthood, they can use the funds for wealth-building activities, such as purchasing a home or starting a small business. Because baby bonds are a nascent policy, there are no published empirical studies on impact, and the literature overall is sparse. However, a number of simulations exist; in this brief, we provide a literature review of three simulation studies that model the potential impacts of baby bonds, with a focus on outcomes relating to racial wealth equity. We also review the literature of related early life wealth-building programs (e.g., child development accounts) to assess outcomes that may be achievable with baby bonds policies. The three simulations we analyzed all find that baby bonds would reduce Black-white racial wealth inequities, though they differ in scale. Zewde (2020) predicts the biggest improvement in racial wealth inequities—predicting that at the median, the white/Black gap would be reduced to a factor 1.4 to 1 ($79,000 to $58,000), compared to a factor of 15.8 to 1 ($46,000 to $2,900). Weller and colleagues (2021) estimate that the white-Black wealth gap will reduce to a factor of approximately 2.7 to 1 by 2060, still leaving a gap of $1.37 million. Mitchell and Szapiro (2020) predict baby bonds would narrow the white-Black wealth gap to a factor of about 3.4 to 1 at the median for adults ages 18–25, with a remaining gap of over $90,000.

Research Areas Wealth and financial well-being Race and equity
Tags Wealth inequality Racial inequities in economic mobility Racial wealth gap Race, gender, class, and ethnicity Financial stability Asset and debts Income and wealth distribution
Policy Centers Research to Action Lab Office of Race and Equity Research
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