2 days ago
What a $1,000 baby bond buys, and why one and done isn't enough
A new federal proposal included in the administration's 'one, big, beautiful' bill would provide a one-time deposit of $1,000 to every child born between 2025 and 2028 through Trump Accounts — previously known as the Money Account for Growth and Advancement, or MAGA Accounts.
While the name has changed, the underlying proposal remains the same. It's a welcome sign that lawmakers on both sides of the aisle continue to recognize the value of starting early when it comes to building financial security.
There's longstanding bipartisan support for investing in children from birth. Back in 2006, then-Sen. Jeff Sessions (R-Ala.) introduced a Portable Lifelong Universal Savings Account — a PLUS Account — modeled after the federal thrift savings plan, with an initial $1,000 deposit and a $5,000 annual contribution limit.
More recently, Sen. Cory Booker (D-N.J.) reintroduced the American Opportunity Accounts Act, commonly known as baby bonds, which would seed $1,000 into an account for every child born after Dec. 31, 2023.
The most recent Trump Account draws from a proposal by Sen. Ted Cruz (R-Texas) and would invest that $1,000 in an index fund.
It's been nearly two decades since that first proposal, and Congress is still circling the same starting number. Imagine how much stronger families could be today if, instead of restarting the conversation, we had built on it.
There's broad recognition that raising a family has never been more expensive and that the rising cost of essentials is contributing to declining birth rates. Recent estimates show that families spend between $15,000 to $21,000 in a child's first year alone, covering diapers, formula, baby gear, and child care. These aren't optional extras, they're baseline costs of parenthood.
Baby food and formula costs rose 8.7 percent from January 2023 to January 2024, outpacing overall inflation. Diapers remain a major strain on household budgets, with 1 in 3 struggling to afford them even before the pandemic, and 1 in 4 now reporting they've had to miss work or school due to diaper needs.
Child care is another overwhelming expense. In nearly every state, the cost of full-time infant care exceeds $14,000 a year, which is more than 10 percent of median household income. KPMG estimates that the cost of daycare and preschool has surged by 263 percent since 1990. On top of that, tariffs could raise prices on cribs, car seats and strollers by as much as 128 percent, according to S&P Global.
These are basic safety items, not luxury goods, and they're increasingly out of reach.
None of these costs can be meaningfully addressed by a one-time Trump Account, or by baby bonds or PLUS Accounts alone, but they shape the reality into which these proposals are introduced.
Families grappling with steep costs today are far less likely to contribute to long-term savings accounts, even with a $1,000 head start. That's why policies like the Trump Account must be viewed not as stand-alone solutions, but as part of a comprehensive strategy to help families meet today's demands while planning for tomorrow's opportunities.
The Trump Account would represent a step forward in how the government invests in family and long-term financial stability. It shares a key idea with prior proposals: the earlier the investment, the greater the return.
There are, however, important differences in design. Baby bonds were proposed as government-funded accounts invested in a bond with an anticipated 3 percent annual return, receiving ongoing contributions, especially for children from households with limited financial resources, and these distinctions are a constructive differentiator.
The Trump Account, by comparison, offers a one-time government deposit to be invested in an index fund, which has the potential for a higher rate of annual return, and because it is tied to the stock market, also carries additional risk.
As a one-time deposit, it is not yet a full solution because it lacks the consistent annual investment to make its potential a meaningful tool for financial growth for children who are born into families without wealth.
This ongoing investment matters. With inflation driving up prices and wages failing to keep pace, families need more than symbolic gestures. They need tools that build over time and bridge the gap between short-term help and long-term financial security.
This is not just about individual families. It's about national economic potential. The Institute for Women's Policy Research estimates that if women participated in the workforce at the same rate as men, it could add $4.3 trillion to the U.S. economy this year.
But that participation depends on the affordability of child care, baby essentials and family stability, areas where rising costs continue to hold parents back.
The Trump Account reflects growing awareness that financial opportunity begins at birth. But if we're serious about building economic resilience, we must ensure that early investments are designed to grow and to last.
Ongoing investment, like in the baby bonds and PLUS Account proposals, offers a path forward that is practical, scalable and rooted in research.
If we want to give every child a real chance at economic mobility, it's not just about when and where we invest. It's about how we follow through.
Marisa Calderon is the president and CEO of Prosperity Now.
