‘Baby Bond’ Idea Offers Opportunity for Security

In 1797, Thomas Paine wrote a pamphlet titled, “Agrarian Justice.” In it, Paine proposed the creation of what we now call Social Security. Paine also proposed providing every American — regardless of sex or race — with a stake. That stake was to be a sum of £15, or about $2,000 today. Its purpose was to help people reaching adulthood establish themselves.

A modern version of this idea, known as the Baby Bond, was developed by economists William Darity of Duke University and Darrick Hamilton of The New School in New York City. For the unfamiliar, Baby Bonds are a trust account into which money is seeded on a one-time or annual basis. That money then is invested into low-risk assets, achieving a modest return every year.

Here’s how such a plan might work: At birth and every year to age 18, Virginia deposits $100 into every child’s trust account. Now, imagine those accounts also were open to other contributors. Those contributors might include a child’s parents, extended family, the parents’ employers, the child and the child’s employers (assuming the child starts working at age 15) or even angel investors. There might even be bonuses for graduating high school or college, or maintaining a certain GPA.

If, at the appropriate times, these contributors each gave $100 a year to a child’s trust account, then it’s easy to see these accounts becoming significant assets. Imagine turning 25 and receiving $17,000. That’s money that can provide the basis for lasting financial security and upward mobility.

And as luck would have it, this year is an election year in Virginia. We’re fortunate to have two candidates — Terry McAuliffe and Glenn Youngkin — who understand finance. Here’s an opportunity to make a real and lasting difference, gentlemen. I hope you seize it.

Originally printed as a letter to the editor of the Richmond Times-Dispatch. Click here to view.