Based on local models in the United States, the 401Kids Savings Act would create children’s savings accounts that would be built on state 529 college savings platforms and managed by state Treasurers.
After accounts are established for all newborns and kids under age 18, families, non-profits, employers, foundations and others could contribute to a 401Kids Account. The savings account, starting at age 18, could be used for post-secondary education and training, a small business, a first home or retirement security. While all families could contribute up to $2,500 per year to the accounts, only lower- and moderate-incomes families would receive direct federal support.
According to outside analysis by the Constellation Fund, for every dollar invested in 401Kids, society would receive at least $2.61 in benefits associated with increased income, improved health, additional tax revenues and savings to other government sectors.
U.S. Sen. Bob Casey of Pennsylvania and U.S. Rep. Don Beyer of Virginia led a bicameral delegation with Senate Finance Committee Chairman Ron Wyden of Oregon, Senate Majority Leader Chuck Schumer of New York and Reps. Joyce Beatty of Ohio and Suzan DelBene of Washington in introducing the 401Kids Savings Act. The new bill would create children’s savings accounts (CSAs) for every single child in America, building lifelong wealth and economic self-sufficiency for kids from families with limited resources.
“Wealth inequality is one of the most intractable challenges facing our nation; it perpetuates injustice, slows economic growth, and fosters political dysfunction. Our bill would help reverse this worsening trend by ensuring that all children entering adulthood have the means to invest in their future,” Beyer said. “The positive effects of 401Kids accounts would go far beyond the children and their families who get accounts, because we know that when young adults can pursue education, start businesses, and buy homes, it creates economy-wide benefits. I thank Senator Casey and our other colleagues and partners for their leadership on this crucial legislation.”
Casey said that lack of income means an individual cannot get by, “but a lack of wealth means you can’t get ahead. As American families grapple with rising costs, they deserve a way to save not just for their future, but for their children’s future. My 401Kids Savings Act would provide every child in this Nation with the cushion they need to take risks and pursue opportunities to create generational wealth.”
In America, anybody is supposed to be able to get ahead as long as they are willing to work hard and have determination, Wyden said. However, youth in America now feel less confident about opportunities.
“It’s hard to climb the economic ladder when you’re buried under student loan debt or held down by the rising cost of housing. Senator Casey’s bill is about restoring economic opportunity for young people with a smart approach that will give kids a brighter future, put families on stronger financial footing and pay dividends for our economy nationwide. I’m proud to come from a state that’s an innovator when it comes to helping working people save and build a nest egg, and Senator Casey’s bill is a great opportunity to build on that success,” Wyden said.
Along with introducing the bill, Casey also released a new report called “401Kids: Building Wealth for the Next Generation,” which delves into the proposal and examples of how CSAs are already working for kids in several states.
“For too many Americans, the promise of the American Dream seems out of reach,” Schumer said. “The 401Kids Saving Act would invest in our nation’s youth and make it easier for future generations of children to build savings, escape poverty and obtain economic security. No one should miss out on the opportunity to go to college, own a home, or start a business because they don’t come from a wealthy family. This legislation would ensure that every child in America has much more ability to reach their full potential.”
Beatty said the legislation would empower children, especially of middle- and working-class families and instill financial capability in youth.
“As co-chair of the Financial Literacy and Wealth Creation Caucus, I am honored to lead the bicameral 401Kids Savings Act with Reps. Beyer and DelBene to give America’s youth the head start they need to pursue a degree, buy a home, or start a small business, enabling them to achieve a bright future,” Beatty said.
DelBene said that every child deserves the opportunity for success, “regardless of their background, family’s income, or where they live. Unfortunately, millions of young Americans are on track to have less wealth than their parents did at their age. This is especially true for low-income families and communities of color. This legislation would create universal children’s savings accounts and serve as an important step toward providing children with a financial foundation that will set them up for a successful future, helping them to better afford college, buy a home, or start a business.”
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Rebecca Barnabi
