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What if every baby born in America was given a free $7,000 savings account to invest and grow over their lifetime?
It may sound unbelievable, but according to one American, this small investment at birth could grow into a million dollars by the time the infant reaches retirement age.
An Out-of-the-Box Concept
The original poster (OP), Bill, introduced his innovative idea to establish trust fund–style accounts for all newborns in the country. At first glance, it seems like an outrageously idealistic concept. But after explaining the math, Bill makes a compelling case for how this could be a game-changer.
The Power of Compounding Interest
The key factor that makes Bill’s idea viable is the long-term power of compound interest. By investing $7,000 at an infant’s birth and letting it accumulate entirely tax-free with market returns, the balance could easily grow to over $1 million in 65 years due to compounding interest.
Starting Early Is Critical
Bill stresses that the key is starting investment early — on day one of a child’s life. This solution captures those critical extra years of growth compared to waiting until adulthood to start saving in a retirement account. Bill asks, “Why wait until people start creating an IRA or 401k by the time they’re, you know, 25 or 30 or 35?”
A Shared Stake in America’s Success
This idea is bigger than just giving babies a nest egg. Bill envisions it as giving every American a share in the country’s prosperity. Bill says his plan would “start to give everyone in this country a piece of the success of the country.”
Surprisingly Affordable for the Benefits
At first, a universal savings plan would have an astronomical price tag. But Bill estimates the annual cost would be around $20 billion, assuming 4 million births per year and $7,000 per account.
Implementation Challenges Remain
Bill’s idea is brilliant in its simplicity. However, large-scale programs still face daunting implementation challenges.
Who controls and invests the funds? Can the rules prevent parents from exploiting the accounts? How can we keep administrative costs minimal?
Unique Benefits Beyond Retirement
While the main goal is retirement savings, lifelong accounts could have other uses earlier in life. For example, they could help fund college costs or a home down payment. Loans against the balance could provide emergency cash flow during crises.
The Risk of Early Withdrawals
“Banks would just start letting people borrow against that money, and the banks would get it all. No one would wait until 65.”
Who Should Foot the Bill?
“Issue with this is… it cost me 5k to have each baby. So you’re gonna tell me my child needs 7k… more than the parents who just paid 5k to have them?”
The Impacts of Inflation
“1M in ‘22 dollars? With inflation by 67 years, that’d be worth ~$90k today in parity; it’s good, just not the illusion of what $1mil is today.”
Bill’s Out-of-the-Box Thinking
While this may initially seem like an outrageous plan, Bill deserves credit for his fresh, out-of-the-box thinking. He sees an opportunity to leverage the impressive power of compound investing and the time value of money. Bill aims to make capitalism more equitable and inclusive by providing every American a share.
Turning Vision Into Reality
For Bill’s plan to become a reality, it would take strong political leadership and public support. But the estimated $20 billion annual budget seems reasonable for such massive potential benefits.
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