A new Social Security benefit would provide every American $25,000 after graduating from high school if Congress approves it.
Representative Dean Phillips of Minnesota has introduced the American Dream Accounts Act, a bill that would call for a new program within the Social Security Administration that would open an account for every child born in the United States.
Around $5,000 would be put in an index fund, which would become available upon high school graduation or receipt of a GED diploma or certificate.
By the time an individual is eligible to use the funds, the bill anticipates they will have earned a roughly 10 percent annual rate of return, making $25,000 available for most Americans upon reaching adulthood.
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“Fulfilling the promise of our great nation requires that everyone have a chance at the American Dream. This legislation provides every American child the opportunity to flourish and realize their full potential,” Phillips said in a statement.
“Investing pays dividends, and it is time to bet on the American values of self-determination and opportunity for all by passing the American Dream Accounts Act,” he said.
Americans with disabilities could get the high school diploma or GED requirement waived.
The bill would also allow students to track the performance of their investment portfolios through a mobile app and could be instrumental in helping young adults reach financial freedom, make a home down payment, pay for their education or even start their own business.
“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,” said Jim Pugh, executive director of the Universal Income Project, in a statement.
The program would also call for a $10,000 bonus payment for those who participate in the Peace Corps or AmeriCorps.
“The bill has the right idea about the need for more financial literacy and an actual opportunity for young people to have money to invest and manage,” Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, told Newsweek.
“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,” he said.
Despite the undeniable pros of such a benefit, Beene said funding it is a completely separate issue.
“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,” he said.
Currently, the fund for Social Security payments for retirees and those living with disabilities is set to become insolvent by the mid-2030s if no changes are made by Congress.
