We already have ‘baby bonds’
1/18/2018

​As economists float the proposal to give every newborn in the United States a “baby bond” account with between $500 to $50,000 in cash, Michael Sherraden, director of the Center for Social Development (CSD), says a solution already exists — Child Development Accounts, a policy concept first proposed in his groundbreaking 1991 book, “Assets and the Poor.”

“We don’t have to reinvent everything,” said Sherraden, the George Warren Brown Distinguished University Professor at the Brown School of Social Work at Washington University in St. Louis. 

Sherraden appeared Jan. 10 on the National Public Radio show “1A” for the segment, “Who is looking out for America’s children?”

Sherraden is a pioneer in asset building and community development. He has received wide recognition for his impact on public policy and is the creator of two systems: Individual Development Accounts (IDAs), a matched savings program designed to help working poor people save money and accumulate assets, and Child Development Accounts (CDAs), which have been adopted in several U.S. cities and states, and as national policy in Singapore and Israel.

“This has moved beyond the idea stage,” he said. “And I think it’s really important to recognize that we have a body of evidence about what can happen if you set up accounts for children and money accumulates in them.”

The CSD has been running a randomly assigned experiment, with treatment and control groups, in Oklahoma for the past 10 years, he pointed out.

“We have very good data on if kids have an account and their assets are accumulating versus kids who do not and what happens to them,” he said. “We have documented that we can actually set this up. We can put it in place. It’s not just a pie in the sky idea. And effects on families and children are positive.”

Research results have been published in numerous peer-reviewed scientific journals, Sherraden said.
“We can say with some confidence that if you set-up a Child Development Account system and you put even $1,000 in it — doesn’t have to be $20,000 — we know that the families themselves will begin to save more into that account,” he said. “We know that the educational expectations of the parents will increase — and we also know that’s associated with educational achievement later on.

“We know the outlooks of the parents become more positive. We see measurable positive effects on social-emotional development of children in the early ages ahead of school. We have evidence that parenting practices become more positive and less punitive. And we know that the poorest families are to some extent buffered from effects of economic hardship,” Sherraden said. “In fact, positive effects of CDAs are strongest among the poorest families.”

A universal Child Development Account policy can very efficiently build on an existing policy structure, the qualified tuition (or 529) college-savings plan, said Sherraden, who was named in 2010 as one of Time Magazine’s “100 Most Influential People in the World” for his work on the asset-building accounts.

“A policy structure already exists,” Sherraden said. “You don’t have to re-build it. You can just adapt it to serve the whole population, which would be a very positive thing to do. We know that kids and families are going to be better off even with relatively small investments and assets can build over time. It’s a policy idea that we can put in place, and it will be sustainable.”