Trust Fund Baby

What if, with the government’s help, every baby could start out life with a trust fund, no matter what the family’s financial circumstances? While some would certainly call this a great idea, detractors call it one more step toward socialism.


Congress is considering a bill that would give each child born in the United States a $500 savings account, with the goal of promoting savings that would later be used for education, a first home or retirement. Under the ASPIRE (America Saving for Personal Investment, Retirement and Education) Act, low-income children would receive additional funding, and all participants could add to their accounts over time.

It would seem that ensuring that American children have some small amount of financial security from birth is a positive for a number of reasons. The new plan would give kids at all income levels financial education, as they work to make the modest initial deposit grow. The importance of learning about saving and finances can’t be overstated – part of the problem with our economy today stems from a lack of appreciation for debt and future planning.

The purpose of the accounts would be to get people invested in their futures, allowing those who never had an asset to change their mindset and learn from the experience. Although $500 doesn’t sound like much, properly invested and amortized, it’s possible to build significant savings over time. The ASPIRE Act also would pair the creation of the accounts with financial literacy programs in schools.

A similar program has been underway in the United Kingdom since September 2002. It’s different than the U.S. version in that there are no restrictions on how recipients can spend the money.

Lawmakers are expected to reintroduce the ASPIRE Act before the end of the year, and it already enjoys bipartisan support. The challenge will be how to justify spending on the program during a time of financial crisis and budget deficits. The proposal is estimated to cost about $37.5 billion initially, then $3.25 billion per year.