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.