Imagine graduating high school and having $25,000 waiting for you! If Congress gives the green light, this could become a reality for every American student.
Representative Dean Phillips from Minnesota has proposed the American Dream Accounts Act, aiming to create a policy under the Social Security Administration. This initiative would establish investment accounts for every child born in the U.S. At birth, about $5,000 would be invested in an index fund. Once they finish high school or obtain a GED, these funds would be accessible.
The plan expects that by the time teenagers graduate, their investment will have grown to approximately $25,000, thanks to a projected annual return of 10 percent.
“Every American child deserves the opportunity to fulfill their potential. This legislation supports that vision,” Phillips stated. He emphasized that investing is crucial and it’s time to endorse the American beliefs of self-determination and equal opportunity.
Moreover, students with disabilities could bypass the high school or GED requirement. The bill would also offer a mobile app for tracking investment growth, helping young adults achieve financial independence, afford homes, fund education, or launch businesses.
Jim Pugh, the executive director of the Universal Income Project, mentioned, “This act aims to level the playing field for financial success. A financial boost should not be a privilege for a select few.”
Additionally, participants in programs like the Peace Corps or AmeriCorps would receive a $10,000 bonus as an incentive.
Pugh added, “Having ownership of your money and understanding how it benefits from compounding interest can foster better investment habits for the future.”
However, funding this ambitious program poses challenges. As noted by Beene, the Social Security Administration already faces financial hurdles, and introducing a $5,000 fund for every newborn could be overwhelming in terms of finances and management.
Currently, the Social Security fund for retirees and disabled individuals is projected to run out of funds by the mid-2030s, if Congress doesn’t intervene.