As the dust settles on the 2021 legislative session, it is plain to see that Connecticut took a major step towards breaking the cycle of poverty, also known as the poverty trap, thanks to State Treasurer Shawn Wooden, the state legislature and Gov. Ned Lamont.
In welcome news that will simultaneously help to shore up our state’s economy and promote financial well-being for those born into lower income families, Wooden’s “Baby Bonds” bill was approved by both Houses of the General Assembly and signed by the governor last month.
This legislation will not bring generational poverty to its immediate and final conclusion, and it wasn’t designed that way. What it does do is finally provide people with the desire to break free from the trap, the means to do so. And it does so by investing in us, all of us, as Connecticut residents.
The Baby Bonds initiative means more than just handing $3,200 to every child born into poverty in Connecticut from this day forward, although it may appear that way at first glance. Upon a closer consideration, this legislation demonstrates Connecticut’s commitment to supporting the financial well-being of every future Connecticut resident, beginning at birth. Financial wellness is directly tied to educational wellness and health wellness, and it makes our communities stronger.
Financial well-being is different than financial literacy in some essential ways. While a financially literate person may have the knowledge of good financial practices, that person may not be able to employ those practices to their benefit. According to the Consumer Financial Protection Bureau’s recent study, financial well-being means having financial security and financial freedom of choice, in the present and in the future. It means having control over your regular finances, having the capacity to absorb a financial shock, being on track to meet financial goals and having the financial freedom to make the choices that allow you to enjoy life.
Connecticut’s credit unions are champions of financial well-being because they are not-for-profit financial institutions that pour their profits back to their customer-members, largely in the form of preferential interest rates on loans and deposits. This is why we were delighted to see the legislation include the provision that young people receiving these bonds will eventually be required (in middle and/or high school) to receive financial education to become eligible to receive these funds. We all win when more of our citizens possess a basic understanding of how money works and how to manage their personal finances.
The grim reality is that Connecticut has turned a blind eye to lingering social inequities and apathetically abided its widening rich-poor gap. By failing to require coursework in economics and personal finance, we have left our children —especially those growing up in poverty— ill-prepared for a financially productive adulthood. Until now.
Treasurer Wooden, the legislature and Governor Lamont, have the vision and understanding that breaking the poverty trap requires us to cut at the root. The Treasurer’s office will invest these funds for every child whose birth is covered by HUSKY A, the state’s Medicaid program. Then at age 18, that child becomes eligible to use those funds in a variety of highly productive ways —for higher education, investing in or starting a Connecticut business, purchasing a home in the state or even investing for retirement.
This helps to build a holistic system that levels the playing field by supporting the financial well-being of everyone in our communities.
This is the credit unions’ home turf — our success comes only when our members and surrounding communities succeed. And when you think about it, this is what the Baby Bond legislation does for our entire state —it recognizes that investing in those members of our society who genuinely need our help to succeed, really is a sound investment in our entire state.] We all win when someone emerges from a life of poverty.
Connecticut has put the state’s money where its mouth is and will make this critical investment in our economic resiliency. It addresses economic disparity and wealth gaps head on. And it creates a much better path for economic success and financial well-being for so many people from this day forward.
Bruce Adams is President & CEO of the Credit Union League of Connecticut, former Deputy Commissioner of the Department of Revenue Services and former Acting Commissioner of the Department of Banking.