By Caroline Miller
The term “trust fund baby” leaves a bad taste in many people’s mouths. We picture one of the smug faces on New York Magazine’s infamous “Nepo(tism) Baby” cover, or a Roy sibling from the HBO drama Succession. We despise how they thoughtlessly swipe their credit cards, but we fail to understand the financial systems that support their glamorous lives. What if we tried to set up more Americans to live like they do?
The problem is not that we have too many trust fund babies. The problem is that we do not have enough. America should create a broader avenue for intergenerational wealth accumulation and open it to those who have historically been excluded.
In recent years, a handful of states have pursued this goal through statewide baby bond programs. These are essentially trust funds for children from low- and middle-income families, with seed money provided by the government that, once the kids turn 18, can be used for activities known to be important wealth builders—homeownership, education, and entrepreneurship. Connecticut, California, and Washington D.C. have already instituted baby bond policies. New Jersey has proposed similar legislation but has failed to get it across the finish line.
New Jersey, a prosperous yet deeply unequal state, has an opportunity to institute a similar policy as it develops the budget for its upcoming fiscal year. The program could make more children “trust fund babies.”
Under Bill A1579/S768, introduced to the New Jersey legislature in 2022 but unactioned since, children from low-income households could receive savings accounts with $1,000 at birth. The account would grow over time, supporting a lifetime of wealth-building and allowing recipients to use the funds to purchase homes, pay for college, or start a business. This program would establish economic opportunity as a birthright for more children in New Jersey and take a thoughtful step toward closing the state’s racial wealth gap. After all, the most important indicator of generational wealth is not the ability to buy a designer bag or expensive car, but the ability to accumulate assets and pass those assets down to future descendants.
This is a particularly pressing issue in New Jersey, given the state’s notable wealth inequality. The Garden State consistently ranks among the top states for income in the country, but by examining differences between wealth and race, a clear gap appears. According to the U.S. Census Survey of Income and Program Participation of 2018, a white family in New Jersey has a $300,000 higher median net worth than a Black or Latino/a household. At the federal level, this gap is only $160,000 between those same families. This massive gap traps New Jersey residents in chronic cycles of poverty and economic immobility.
The gap exacerbates other social ills created by the state’s troubled history of policies like redlining and predatory lending, which continue to segregate the population and encourage white, already-privileged New Jerseyans to hoard economic opportunity. If we let New Jersey’s rich accumulate and protect their wealth, we should let New Jersey’s low-income families do it, too.
Even with record spending in the state’s FY 2024 budget, Governor Phil Murphy’s administration has failed to develop a comprehensive approach to closing the racial wealth gap. As Murphy prepares the budget for FY 2025, his administration must take a stronger and more targeted approach. The governor will finalize his FY 2025 budget recommendations early in the new year, and the state legislature (where Democrats control both houses by wide margins) will then deliberate on the full budget in the summer.
Recently, Murphy’s anti-poverty priorities have centered around income transfer payments like the Child Tax Credit and property tax relief. While these payments are essential in the short term, they do not promote asset accumulation or directly benefit children, both of which are integral in breaking the vicious cycle of poverty. If New Jersey wants to tackle the racial wealth gap, it needs a long-term, systemic approach to get everyone on the same playing field, not just income transfer payments.
When Governor Murphy proposed a similar program in 2020, opponents raised financial concerns, arguing that the state needed to focus on short-term antipoverty measures and could not afford a program that would not create an impact for at least another 18 years, especially during the pandemic. The lawmakers’ “scarcity mindset,” as described by sociologist Matthew Desmond in his book Poverty By America, creates “fictitious fiscal constraints” that prevent real action against chronic poverty. New Jersey lawmakers have fallen into this trap by not moving forward with baby bonds legislation in the past few years, but funding a New Jersey baby bonds program is needed now more than ever.
The baby bonds program alone would not undo New Jersey’s wealth inequality, but it would be an important step in the right direction. New Jersey is prosperous and well-funded, and it has no excuse for its continued failure to allow all its residents to build wealth. If we let wealthy families build wealth through trust funds, we must create similar avenues for the less wealthy. The time to begin building a system of opportunity is now.
Caroline Miller is a first-year MPA-PNP student, specializing in Social Impact, Innovation, and Investment. Caroline completed her undergraduate studies at the University of Massachusetts Amherst with a double major in Economics and Political Science.