The Social Security Administration has unveiled a new legislative initiative that proposes granting every American child $25,000 upon their high school graduation or earning a GED. The American Dream Accounts Act, introduced by Representative Dean Phillips from Minnesota, seeks to create an investment account for every child born in the U.S. As part of this initiative, the Social Security Administration would contribute roughly $5,000 into an index fund for each new infant.
When the child finishes high school or receives a GED, the account is projected to grow to about $25,000, assuming an annual return of 10 percent. Phillips remarked, “Realizing the promise of our great nation requires that everyone has the opportunity to chase the American Dream. This legislation empowers all American children to thrive and attain their maximum potential.”
The resources generated from this initiative could be utilized for multiple purposes, including a down payment on a home, educational expenses, or starting a business.
The proposed legislation also comprises provisions for American citizens with disabilities, enabling them to bypass the high school diploma or GED requirement.
Proposal for American Dream investment accounts
Moreover, participants in the Peace Corps or AmeriCorps would qualify for a bonus payout of $10,000.
Jim Pugh, the executive director of the Universal Income Project, noted, “A financial jumpstart should not be limited to just the privileged few. The American Dream Accounts Act will equip every child with the means to pursue their dreams, thus creating a level playing field for sustainable success.”
Experts in financial literacy are in favor of this concept, highlighting that early financial education can yield long-term advantages. Alex Beene, a financial literacy educator at the University of Tennessee at Martin, stated, “When you possess your own money and witness the impact of an index fund with compounding interest over time, you are more likely to understand the positive aspects of investing in your future.
Nonetheless, securing funding for the program is a major concern.
Beene further added, “We already know about the funding difficulties the Social Security program is likely to encounter in the years ahead, and implementing a $5,000 contribution per child born in the country would be a colossal endeavor, both financially and in terms of staffing.
It should be emphasized that unless Congress acts, the Social Security fund is projected to face insolvency issues by the mid-2030s. The most recent official forecasts predict that the primary trust fund underpinning Social Security benefits is set to exhaust its resources around 2033 or 2034, after which guaranteed payments are anticipated to decrease by nearly 20 percent. As the American Dream Accounts Act advances through the legislative stages, the potential ramifications for the financial futures of millions of young Americans remain uncertain.
