I was glad to get to talk with
of American Inequality and Dustin Palmer of Give Directly about how to best structure family benefits. We talked about baby bonds (esp. Trump accounts) and baby bonuses, and I’ll just disambiguate them here.Baby Bonds
Money parked in index funds till a child is ~18.
Put in a small amount at birth, multiply through compound interest.
Aimed at helping launch kids into adulthood.
Baby Bonus
Money given to parents immediately after birth.
Multiplier effect comes from helping parents when marginal dollar is more valuable, not through compound interest
Aimed at helping parents weather the income shock of welcoming a new baby.
In my day job, I work on improving family economic security, and one big focus is baby bonuses. I have a worked out proposal for a $2000 baby bonus here.
You can think of a baby bonus as analogous to unemployment insurance—it cushions the income shock that comes with having a baby. Neither completely closes the gap, but it helps protect families from bad short term choices driven by scarcity.
A baby bonus cushions the opportunity cost of saying yes to a child.
