Baby Bonds: A bold solution to a systemic problem

When the Connecticut State Legislature wrapped up its work on the final day of the legislative session in early June, it took a major step towards breaking the crippling cycle of poverty by approving a significant piece of legislation. It is known as the Baby Bonds Law, and it deserves to be championed across our system. States that adopt Baby Bonds legislation would be taking actual, tangible steps towards achieving “Financial Well-being for All.” We should lend our support system-wide to help pass Baby Bonds laws in more states and especially at the federal level. 

This legislation (which has since been signed into law by Governor Ned Lamont) will not end generational poverty by itself, but it does finally provide people with a better chance to break free from the poverty trap. It does so by making an investment in the people of Connecticut—an area credit unions know well— which is why we gave our enthusiastic and complete support to getting the bill passed here. 

What is a Baby Bond? 

Under this new law, the state of Connecticut will now establish a $3,200 savings account for every baby born in Connecticut whose birth is covered by the state’s Medicaid program.

When children reach age 18, they become eligible to use the funds in a variety of highly productive ways, if they are still Connecticut residents: for higher education, investing in or starting a Connecticut business, purchasing a home in the state or even investing for retirement. There is one other very important string attached: before accessing the money, the individual receiving the funds must complete a financial literacy course. One more provision which credit unions, long-time champions for improving financial literacy among youth, should find both very familiar and appropriate.

Baby Bonds address generational poverty at its core by directly investing in Connecticut children born into poverty and realizing the return on that investment when those kids use the proceeds to invest in their own financial well-being. It’s a good law, and it comes not a minute too soon.

Would your state benefit from a Baby Bond proposal?

States are looking for ways to make their economies more resilient and better equipped to withstand the next pandemic. They need to give serious consideration to the long-term economic impact of helping more of their residents have an equal shot at success. This is one important way to reduce brain-drain and secure future prosperity.

Baby Bonds do just that by leveling the playing field and combating the systemic inequality that has disproportionately affected communities of color.

I urge to you consider how Baby Bonds could address the widening wealth gap in your state, and how our credit union system could be part of this bold solution. 

The Credit Union League of Connecticut is a proud member of the American Association of Credit Union Leagues (AACUL) and is committed to collaborating with leagues nationwide to foster the prosperity of the entire credit union movement.

Bruce Adams

Bruce Adams

Bruce Adams is the President and CEO of the Credit Union League of Connecticut (CULCT). He assumed this role in 2019, after spending the bulk of his 15-year career as ... Web: Details