A Wealth-Building Tool for Families, Communities, and the State

Pete Gess
Economic Policy Director

Executive Summary

The median household income in Arkansas now stands at $60,773. But this varies greatly across the state; while median household income in Benton County is $93,506, it is only $34,375 in Lee County. In Arkansas, 44% of families struggle to pay for necessities such as housing, food, child care, health care, utilities, and transportation.

Household wealth is just as important as income. Wealth is a family’s economic reserve, and wealth provides economic security over a lifetime. There are also great differences in wealth across the state. White families have more than eight times the wealth of their Black neighbors. While the greatest wealth is concentrated in Northwest Arkansas, the lowest household wealth is found in South Arkansas and along the Mississippi River. As families struggle to pay the bills, they have no extra funds for savings or wealth-building activities, such as post-secondary education, job training, purchasing a home, or starting a business.

Baby Bonds are designed to alleviate wealth-building challenges in Arkansas. They are a pro-family, pro-opportunity, pro-growth policy to help each child born into poverty grow wealth, as zip code and family situation should not limit that child’s future. For each Medicaid-eligible child born, the state invests initial capital. These funds, managed by the state treasurer, grow significantly by the time of access, when the child reaches 18 to 35 years of age. The markets do most of the work of growing the asset, creating a significant return on investment.

The young person must be a resident of the state to access the funds. They can be used for specific wealth-building activities. As Baby Bonds help a new generation of children escape poverty and build wealth, they also contribute to community and economic development in the state. Baby Bonds have the potential of providing more than $2 billion in new funds for Arkansas over a 10-year period; funds that would be spent in every county in the state.

Policy Recommendation

The state of Arkansas should implement a Baby Bonds program in 2027. The state treasurer should invest $3,500-$4,000 for each child born under Medicaid. When the child turns 18, they will be eligible to withdraw the funds — provided they are a resident of the state — for approved wealth-building purposes, including post-secondary education and job training, home purchase, and business startup. As part of the program, each recipient will also receive financial literacy education.

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