Very pregnant ladies of the United States! Walk some stairs, eat some spicy food, and sidle up to your partner: Voya Financial is offering $500 to any baby born today.
The idea is to seed those lucky infants’ retirement accounts, in celebration of the not-at-all-made-up National Save for Retirement Week. It is a good start! By the magic of compound interest, that $500 would be worth about $1,200 by the time the child is headed to college and $12,000 by the time she retires, assuming a 5 percent annual return and not a penny of additional contributions.
It is a good enough idea that many a wonk has argued it should be a permanent government policy, not just a corporate gimmick. Twenty years ago, for instance, two senators proposed taking some money from payroll taxes and putting $1,000 in a savings account for every newborn.
Why bother to do that, given that such money could be spent on any number of other priorities? In part because such a policy would help to ensure a stable retirement for millions. About one third of adults have not started saving for their golden years, according to one survey, including a quarter of adults aged 50 to 64. But such savings accounts could have a yet more profound effect on inequality and mobility, even helping to eliminate the racial wealth gap and break the bonds of intergenerational poverty. That is because “baby bonds,” as they are sometimes called, would help give children born to poorer families funds to pay for college, purchase a house, or start a business.
After all, just having that $500 in the bank would give the 10,000 babies born today a higher net worth than 25,300,000 American households.