Rectifying Racial Wealth Disparities through Baby Bonds

Abstract

This paper proposes recommendations for the design of a Baby Bonds pilot program by the GRO Fund, with the aim of reducing racial wealth inequality and promoting economic empowerment among minoritized populations. Drawing on the history of the racial wealth gap and insights from publications and interviews, the paper proposes specific recommendations for the GRO Fund's program design. To assess various aspects of Baby Bonds’ impact, the GRO Fund should consider a program duration of 10+ years with two cohorts of different ages and interim data gathering. Eligibility requirements can be based on participation in existing programs and/or household income. This paper discusses three levels of race specificity - race-neutral, race-conscious, and race-specific - and recommends that the GRO Fund aims to be race-specific. Usage restrictions should mimic archetypal Baby Bonds but consider additional wealth-building strategies. Drawdown restrictions should block fund access until participants are 18 years of age, with limited access before 18 in emergency circumstances. Financial advising should be offered to recipients instead of financial literacy training to better support their financial well-being. Lastly, this paper recommends that the GRO Fund invests funds in an investment vehicle that minimizes risk to principal, earns 4-6 percent annual interest, and is easily liquidated. These recommendations attempt to take into consideration the unique needs and goals of the GRO Fund and its target communities, while also aligning with the core principles of Baby Bonds. The implementation of a well-designed Baby Bonds pilot program by the GRO Fund has the potential to significantly contribute to reducing racial wealth inequality and promote economic stability among minoritized populations by furthering the case for Baby Bonds.