There are slight, but significant, differences between Baby Bonds and Children’s Savings Accounts (CSAs). Baby Bonds are held by the government on behalf of a child. The funds are meant to be a savings vehicle used for the purchase of a wealth-building
asset, like a home or a small business. CSAs, however, are meant for saving and investing in higher education. CSA programs can also be housed at a community-based organization or a bank. While a baby bond can also be used for higher education, CSAs
are specifically designed to help pay for postsecondary education.
Differences aside, CSA providers and programs can learn from the design of Baby Bond programs and policies.
The concept of Baby Bonds comes from economist Darrick Hamilton. Hamilton designed Baby Bonds to “narrow the racial wealth divide by providing the largest investments to children from the lowest-resourced households.” And the lowest-resourced households
are disproportionately households of color.
The brief outlines seven essential elements of state and local Baby Bonds policies, some of which are similar to key CSA policy design elements. The Baby Bonds’ policy elements are aimed at “maximiz[ing]
the impact on the racial wealth divide,” and they include the following:
Children receive a substantial monetary endowment.
Children from lower-resourced households receive higher amounts.
Children are automatically enrolled.
Funds are restricted to wealth-generating assets.
Baby Bonds are structured as an endowment.
The program has a sustainable funding source.
Baby Bonds investments are excluded from asset limits for state benefits.
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