Starting Early – Tax Advantaged Investment Accounts For Newborn Babies

Money magazine published an interesting article in the November issue about Michael Schrraden, founder of Washington University’s Center for Social Development.  Schradden believes that giving newborns a tax advantaged account with an initial deposit from the government could help in the fight against American debt.


His proposals have helped launch a program in the UK and he has support currently from both Democrats and Republicans in Congress.  The lead proposal is called the ASPIRE Act and would offer a one-time $500 deposit and an additional $500 for the poorest kids.  This money plus any additional money invested would could be invested in a number of funds. 

What do you think of this program?  I think it could be beneficial but only if implemented extremely well.  Personally, I would need to hear more about the plan.  Where will the funding come from?  Will parents be educated about the system? Will parents have the ability to withdrawal funds for themselves? 

 As fiscally conservative as I am, this smells like a recipe for more tax shelter for high earning families.  Maybe I am a pessimist but coming from a low-income family there certainly was not enough money to put away in a kiddie 401K for me.  If you can’t make rent, you can’t invest for your kid.  My second fear would be irresponsible parents (and there are plenty out there) withdrawing their children’s funds and squandering the money.

I would love to hear what others think. 

3 Responses to “Starting Early – Tax Advantaged Investment Accounts For Newborn Babies”

  1. marilyn Says:

    i would like more information on small investments for a great godson.

  2. Nicole McInerney Says:

    Marilyn – I don’t provide alot of specific advice for individuals. Sorry! That moves me into financially planning territory. You may want to investigate 529 College Savings Plans if you are in the US.

  3. Jeff Ryan Says:

    ESAs I think are better plans because they are user driven. 529s have a lot of investment restrictions depending on the state you live in. With a $2000 contribution limit, all you need to budget is approx $180 a month per child. Over 18 years, assuming healthy growth, your kids will be in great shape and won’t have to take out horrid student loans for their undergraduate studies. (Plus contribution limits will likely rise in the coming years making the bottom line more attractive…)

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