A U.S. Congressman wants to give every child a $5,000 head start on their savings, one of the boldest universal income proposals yet aimed at providing fiscal security for everyday Americans.
But does the approach offer the best path toward financial security for future generations, and does it stand any chance of passing?
The idea from Minnesota Democrat Dean Phillips is simple yet ambitious: each American-born or naturalized child would receive $5,000 at birth, invested through the Social Security Administration.
With an assumed average annual return of around 10% — a figure that reflects the historical performance of the S&P 500 — this $5,000 could grow to approximately $25,000 by the time the child is 18, offering a substantial financial boost as they enter adulthood.
The money could be used for a variety of purposes: covering college expenses, funding a down payment on a home, starting a business or other meaningful life expenses. Students would have the opportunity to track their investment performance through a mobile app, providing a hands-on way to build financial literacy.
“Fulfilling the promise of our great nation requires that everyone have a chance at the American Dream. This legislation provides every American child the opportunity to flourish and realize their full potential,” Phillips said. “Investing pays dividends, and it is time to bet on the American values of self-determination and opportunity for all by passing the American Dream Accounts Act.”
The Department of Education would also play a role by developing financial education resources to help students understand concepts like investing, saving and budgeting. As adults, they could cash out these funds to support their aspirations, with the potential for an additional $10,000 bonus if they join programs like the Peace Corps or AmeriCorps.
While Democrats are praising the bill for addressing wealth gaps, conservative Republicans are likely to line up against the bill given Social Security’s current march toward insolvency and their historic opposition to universal income.
With rising costs for education, housing, and health care, having a $25,000 financial cushion could help young adults make more informed choices about their future. It’s also a step toward leveling the playing field and promoting financial inclusion, giving even the most disadvantaged children a start on the path to financial security.
