Talisha Tirado has big dreams for her daughter.
She is also unable to work during her pregnancy. Since she has had miscarriages in the past, her doctor told her she needs to go on medical leave — a turn of events that has been deeply frustrating for Tirado, who is eager to support her growing family.
Despite being strapped for cash, she and her fiance are trying to think ahead, such as setting aside money for a college fund.
“We thought about putting a quarter away a day, because it will add up eventually. Or like a dollar a week,” she said.
But a forthcoming Connecticut law will ensure that Tirado doesn’t have to rely solely on spare change to fund her daughter’s college tuition.
Connecticut is set to become the first state in the nation to grant children of low-income parents “baby bonds” — individual trusts paid for by the state, which children can access once they turn 18.
Under the law, any infant born to parents who rely on Medicaid insurance will receive $3,200 in a special savings account. By the time they are able to access the fund, it will be worth nearly $11,000, according to the Hartford Courant.
The legislation, championed by Connecticut State Treasurer Shawn Wooden, aims to reduce generational poverty in the state, which has one of the worst wealth gaps in the country.
“Connecticut is ground zero for wealth inequality, and for us to be first in the nation to tackle generational poverty with baby bonds — that’s powerful,” Wooden said. “I hope others will follow suit.”
The concept of baby bonds has been around for at least a decade, but policymakers have become increasingly drawn to them in recent years, arguing that these programs could not only reduce wealth inequality, but also boost social mobility and help close the racial wealth gap.
“At the root of the racial wealth gap, and wealth inequality in general, is capital itself,” Darrick Hamilton, an economist and early proponent of baby bonds, told the Atlantic last year. “Baby bonds are specifically aimed at giving people that seed capital, that asset that passively appreciates over their lifetime.”
The bonds act as seed grants paid for by the government, which would build interest from birth until adulthood, at which point the beneficiaries can access them.
Wooden said he was particularly inspired by the efforts of Sen. Cory Booker (D-N.J.) and Rep. Ayanna Pressley (D-Mass.) to introduce such legislation at the federal level.
The Connecticut baby bonds are part of a larger, bipartisan bonding package that easily passed both the chambers of the state legislature earlier this month: 34 out of 36 voting senators approved the bill, along with 133 out of 138 state representatives (the package also includes investments in construction and transportation). Connecticut Gov. Ned Lamont (D) is expected to sign the bill, which would go into effect on July 1.
The bonding bill sets aside $50 million a year for the next 12 years — $600 million total — to fund the accounts, which will be managed and invested in by the treasurer’s office. Because it’s pulled from this dedicated fund, the amount of the bond can change depending on how many births are covered by Husky Health, the state’s Medicaid program, that year. According to state records, the average number of births covered by Husky between 2012 and 2019 was 15,861.
The Hartford Courant reports the state is expecting a 6.9 percent annual return on the bonds, meaning by the time the first bond recipients turn 18, they can expect at least $10,635 in their accounts. Any child born to parents relying on Husky would automatically receive the funds.
To qualify for Husky, a household of one must earn $17,131 or less per year. If a family ends up moving off of Medicaid, the account would still be available, and accruing interest.
The money can only be used in certain ways: to cover the cost of higher education (including trade and vocational schools), buy a home, start a business or set aside for retirement.
There are other restrictions, too. Beneficiaries must be residents of the state and pass a state-mandated financial literacy course before they can access their account. They have until they turn 30 to claim the money.
The bill targets low-income families, and while an estimated 60 percent of bond recipients will be White, Wooden said, Black and Latino families are still overrepresented among those who rely on state Medicaid.
Merrill Gay, executive director of the Connecticut Early Childhood Alliance, said the bonds are an important leg up for families with low incomes and few assets to build wealth.
“This is going to help a lot of people who struggle day-to-day, living paycheck to paycheck,” he said.
Despite Connecticut’s reputation as a rich state — it has the highest per capita income in the nation — it has had to contend with worsening economic inequality, much like the rest of the United States.
United Way, which studies financial hardship across the country, estimates that 11 percent of Connecticut residents live in poverty, while another 27 percent struggle to afford basic household necessities.
Nationwide, economic inequality has hit a five-decade peak, while the racial wealth gap has also widened. According to one recent analysis from the Brookings Institution, the net worth of a typical White family ($171,000) was 10 times greater than a typical Black household in 2016. The racial wealth gap is as wide now as it was in the 1960s.
Chuck Marr, director of federal tax policy at the Center on Budget and Policy Priorities, said there are limitations to what the bill can do to lift families out of poverty.
“The money doesn’t flow to someone until they’re [of age],” Marr said. “And a lot happens between a baby being born and someone turning 22 or 18.”
That’s why baby bond bills need to work in tandem with other legislation, Marr said, naming the Biden administration’s proposed child tax credit as one example. That credit, which would give eligible households up to $3,600 a year per child, would help families struggling to cover all their basic needs.
While the first baby bonds won’t be available to Connecticut residents for another 18 years, Wooden believes he won’t have to wait that long to see their impact.
He referenced one recent study from Washington University in St. Louis, which found that parent behavior changed once their children received savings accounts, spurring more family savings.
“This is powerful beyond the dollars that will be available for the beneficiaries," Wooden said. “It’s powerful in terms of how it changes one’s outlook on what’s possible and how you can change your condition and your circumstances in life."
Tirado, the 22-year-old expectant mom, said the new bill is “amazing.”
“It takes a lot of stress off our shoulders,” she said. She imagines her daughter going to cosmetology school or becoming a nurse. Maybe she could use it to buy her own home — something Tirado has yet to experience.
Tirado likes that her daughter won’t be able to access the money until she’s an adult, even though she knows it might get hard in the meantime. Just knowing it exists, Tirado said, allows her to more easily imagine giving her daughter a life she didn’t have.
“I know that is there for her when she turns 18,” Tirado said. “So I can help her with everything else before then.”
