The Social Security Administration has introduced a new legislative proposal that could provide every American child with $25,000 upon graduating from high school or obtaining a GED. The American Dream Accounts Act, presented by Representative Dean Phillips of Minnesota, aims to establish an investment account for each child born in the United States. Under this program, the Social Security Administration would deposit approximately $5,000 into an index fund for every newborn child.
By the time the individual graduates high school or earns a GED, the account is expected to have grown to around $25,000, assuming a 10 percent annual rate of return. Phillips stated, “Fulfilling our great nation’s promise requires everyone to have a chance at the American Dream. This legislation allows every American child to flourish and realize their full potential.”
The funds from this program could be used for various purposes, such as a down payment on a house, education costs, or starting a business.
The bill also includes provisions for Americans with disabilities, allowing them to waive the high school diploma or GED requirement.
American Dream investment account proposal
Additionally, Peace Corps or AmeriCorps participants would be eligible for a $10,000 bonus payout.
Jim Pugh, executive director of the Universal Income Project, commented, “A financial head start shouldn’t be reserved for the privileged few. The American Dream Accounts Act will empower every child with the resources to pursue their aspirations, leveling the playing field for long-term prosperity.”
Financial literacy experts support the idea, noting that early money management can have lasting benefits. Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, said, “If you have money that’s yours and you see the effect that an index fund with compounding interest has on it over a large swath of time, you’re more likely to grasp the positive aspects of investing for your future.
However, funding the program remains a concern.
Beene added, “We already know the funding issues Social Security is approaching in the coming years, and adding to the administration a $5,000 fund per child born in the country would be a massive task, both in terms of money and manpower.
It is important to note that if Congress does not make changes, the Social Security fund will face insolvency challenges by the mid-2030s. The latest official forecasts indicate that the principal trust fund supporting Social Security benefits is expected to deplete sometime in 2033 or 2034, after which guaranteed payouts are projected to decline by almost 20 percent. As the American Dream Accounts Act continues through the legislative process, its potential impact on millions of young Americans’ financial futures remains to be seen.
