Baby Bonds and Connecticut's Experiment in Starting Wealth at Birth

On July 1, 2023, a baby was born somewhere in Connecticut to parents who qualified for HUSKY, the state's Medicaid program. Nobody held a ceremony. The parents probably did not know it, but that child had just become one of the first beneficiaries of a new American experiment: the state of Connecticut set aside $3,200 in a trust in the baby's name, to be invested by the state treasurer and left alone to grow for the better part of two decades. When that child turns eighteen, sometime in the 2040s, the money will be waiting, provided it is used to pay for college or job training, to buy a home in Connecticut, to start a business in the state, or to save for retirement. It is a small sum attached to a large idea, which is that a country serious about opportunity should hand every child not only a school seat but a stake.

In short: Connecticut became the first state to run a baby bonds program, investing $3,200 for each child born on Medicaid from July 2023 onward, payable for education, a home, a business or retirement between ages 18 and 30. I think it is one of the best tools available for narrowing wealth gaps that income policy alone cannot reach, though the strongest objections about timing and size deserve straight answers.

The gap that income cannot close

Most American economic policy works on income: the paycheck, the tax credit, the monthly benefit. Income matters enormously, and progressives have rightly fought for higher wages and a stronger safety net. But wealth is a different animal. Wealth is what lets a family absorb a car repair without a payday loan, put a down payment on a house, help a child through college without crushing debt, or take the risk of starting a business. It compounds, and it passes down.

The Federal Reserve's Survey of Consumer Finances has shown for decades that the typical white family holds several times the wealth of the typical Black family, a gap far wider than the gap in incomes. That difference did not come from nowhere. It reflects generations of exclusion from homeownership through redlining and discriminatory lending, from the farm and home programs of the New Deal era, and from the plain fact that families who could not build wealth in one generation had nothing to hand to the next. Income programs, however generous, mostly help people get through the month. They rarely help a family get ahead of the month.

That is the insight behind baby bonds, an idea developed by the economists Darrick Hamilton and William Darity Jr., who argued that the most direct way to shrink wealth gaps is to give young people from families without wealth an endowment of their own. Senator Cory Booker of New Jersey turned it into federal legislation in 2018, proposing an account for every child, seeded at birth and topped up each year on a sliding scale, with the largest deposits going to the children of the poorest families.

How Connecticut built it

Connecticut's version is narrower than the federal proposal, and the details matter. The legislature passed it in 2021 with strong backing from the state treasurer at the time, Shawn Wooden, and after a funding fight it began with births on July 1, 2023. Treasurer Erick Russell has overseen its launch.

The design has four main features:

1. Eligibility is automatic. A child born on HUSKY coverage is enrolled. Families do not fill out forms or open accounts, which matters because programs that require sign-up tend to miss the families who most need them.
2. The money is pooled and invested by the state. It is not a personal brokerage account; it is a claim on a trust that the treasurer manages, much like a pension fund.
3. The money is restricted. A young adult can claim it between 18 and 30 for a defined set of wealth-building uses: higher education or job training, a home in Connecticut, a business in Connecticut, or retirement savings.
4. There is a financial-education requirement. Claimants have to complete a financial literacy course before receiving the funds.

The program will not pay out for years, so nobody can yet say how it works in practice. That is the honest place to start any argument about it. What we can judge now is the design and the logic.

Here's the argument for it

I think baby bonds are among the best anti-poverty and anti-inequality tools on the table, for four reasons.

First, they target the right thing. If the problem is that some families have no cushion and no starting capital, the remedy is capital. A child-sized endowment that grows over eighteen years attacks the gap at its root rather than treating its symptoms.

Second, the targeting is race-neutral in law and powerful in effect. Connecticut's program is based on income, through Medicaid eligibility, not race. Because of the history above, children born into low-wealth households are disproportionately Black and Latino, so a program aimed at low-income births narrows racial wealth gaps without the legal problems that an explicitly race-based program would face after recent Supreme Court decisions. It also reaches poor white children in rural eastern Connecticut and old mill towns, which is the point. A child's start in life should not depend on whether his parents' town had a factory that closed.

Third, time does much of the work. Money invested at birth has eighteen years or more to compound. The state's contribution buys more future wealth than the same sum handed out at age eighteen.

Fourth, the restrictions point toward ownership. Homes, education and businesses are the classic ladders of mobility in the United States. Linking the bond to those uses aims the money at exactly the moments when a young adult without family wealth most often gets stuck.

The strongest objections, taken seriously

A good argument has to meet the best case against it, and there are serious ones.

"Families need help now, not in eighteen years." This is the most compelling critique. A family struggling with rent today gets nothing from a trust it cannot touch. Many anti-poverty researchers would rather spend the money on cash for families with young children, like the expanded Child Tax Credit of 2021, which sharply reduced child poverty for the one year it lasted. The answer is that the two tools do different jobs and should not be rivals. Cash support helps a household survive; an endowment helps a young adult build. A serious agenda does both, the same way Social Security and public schools coexist.

"The sum is too small to matter." Connecticut's seed is modest, and even after decades of growth it will not buy a house outright. Fair enough. But it can be a down payment, a semester of tuition, or the difference between starting adult life at zero and starting it with something. Booker's federal design, with yearly deposits, would produce much larger balances for the poorest children. Connecticut proves the plumbing works; the size is a political choice that can grow.

"Restrictions are paternalistic." Why should the state decide how a young adult spends her own money? The restrictions do limit freedom, and reasonable progressives disagree about them. The case for them is that the program's purpose is building assets, and that the same restriction applies to the tax breaks wealthier families already enjoy through retirement accounts and college savings plans. Few people call a 529 plan paternalistic.

"Who pays, and is it fiscally sound?" Connecticut debated how to finance the program, including through state borrowing. Funding a long-term investment with a long-term instrument is defensible, but it should be done transparently, and the costs should be compared honestly with the alternative of doing nothing about a wealth gap that already costs the state in lost productivity and public spending.

What happened in Britain, and why it matters

There is a cautionary tale across the Atlantic. The United Kingdom created the Child Trust Fund in 2005, opening an account with a government deposit for children born from 2002, with larger deposits for poorer families. The coalition government ended new contributions in 2011 to save money.

The lesson is twofold. Programs that depend on families to open, manage and remember accounts lose track of the children who need them most; years later, large numbers of British young adults still had not claimed their funds. And programs that pay off only in the distant future are politically easy to cut, because the beneficiaries cannot vote and the payoff is invisible. Connecticut's automatic enrollment answers the first problem. Only public commitment can answer the second.

Washington's version, and what is different about it

Baby accounts have now reached federal law, though not in the form progressives proposed. The 2025 budget law that President Trump signed created what the administration calls Trump Accounts, investment accounts for children with a one-time $1,000 federal deposit for eligible children born from 2025 through 2028, plus room for parents, employers and others to contribute.

It is worth being generous about the overlap. Leaders of both parties now accept the premise that children should start life with an invested stake, which is a real shift and a rare point of common ground. The difference lies in who benefits most. A flat deposit plus tax-advantaged contributions will tend to grow fastest for children whose parents can afford to add money every year. Baby bonds in the Hamilton and Darity tradition do the opposite: they put the most public money where there is the least private money. If the goal is to narrow gaps rather than simply to raise every boat by the same inch, the design has to be progressive, in both senses of the word.

Washington, D.C., has passed its own baby bonds law, and California has created accounts for children who lost a parent to COVID-19 and for some foster youth. States are learning from each other, which is how many durable national programs began.

How we will know whether it worked

Because the first Connecticut babies will not claim their money until the 2040s, the program asks something unusual of politics: patience, and a commitment to measure. Advocates should welcome that, and should say in advance what success would look like, so the program can be judged on evidence rather than slogans.

A few markers are worth watching. The first is the claim rate. If a large share of eligible young adults never collect, the design has failed at its most basic task, and the state will need outreach through schools, community colleges and workforce programs long before the first payout. The second is how the money gets used. A program meant to build assets should show up in down payments, completed credentials and small businesses that survive past their first few years. The third is the effect on the gap itself. Researchers should be able to compare young adults who received the bond with similar peers born just before the program began, a natural experiment that the July 2023 start date makes possible.

There is also a test for the adults in charge. Investment returns depend on how the trust is managed, and the fund should be run with the same transparency and low fees expected of a public pension. A program that asks families to trust the state for eighteen years has to publish its numbers every year.

A stake for every child, from rural towns to city blocks

Picture the eighteen-year-old in 2041, maybe in Bridgeport, maybe in a small town in the northeast corner of the state, finishing high school with no parent able to cosign a loan. The money in the trust will not erase every obstacle. It will tell that young person something the country has rarely said to children born without wealth: you are expected to own something, and we put the first brick in place before you could ask.

That message does not belong to one party or one region. It is how land-grant colleges and the Homestead Act were sold, imperfectly and with ugly exclusions, in an earlier century. The task now is to do it without the exclusions.

What you can do

• If you live in Connecticut, make sure eligible families know. Enrollment is automatic for children born on HUSKY, but a young adult will need to claim the money later. Hospitals, clinics, churches and family resource centers can spread the word now.
• Push your own state. Baby bonds bills have been introduced in many legislatures. Look up your state legislators by address and ask whether they would back one, funded progressively.
• Support the groups building family wealth. The nonprofit directory lists housing counselors, credit and legal aid groups by state, many of them working on the same down payments and small-business starts that baby bonds are meant to fund.
• Know the numbers behind the argument. The inequality dashboard tracks the share of wealth held by the top 1 percent and the bottom half of households, which is the gap this idea is designed to narrow.
• Read more on the bigger fight. Our page on inequality and taxing the rich collects reporting on wealth, taxes and who pays for programs like this one.

A $3,200 deposit for a newborn is not a revolution. It is a down payment on a different idea of what a country owes its children, and Connecticut has already made the first deposit.