To Close the Wealth Gap, the Starting Line Matters More Than the Finish Line: Teach Your Children Well
Kids who grow up with savings accounts are more likely to learn the basics of managing and investing — and more likely to attend college.
Many people don't begin planning for retirement until later in life. Saving earlier can feel financially difficult or secondary to more immediate priorities.
But delaying retirement investing comes at a significant cost: time.
Even modest investments made early can grow substantially through compound returns. The longer money remains invested, the greater the opportunity for growth and long-term financial security in retirement.
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Household wealth in the United States is highly concentrated. The top 10% of households hold most household wealth, while the bottom half own only a small share.
One major driver of this divide is access to assets early in life and the long-term power of compounding investments. These differences often begin in childhood.
Children who grow up with savings or investment accounts are more likely to learn the basics of managing and investing money. They might hear conversations about markets at the dinner table or learn early how compound growth works. Over time, those experiences can shape confidence, financial habits and long-term participation in investing.
Many children, however, don't have those advantages. They enter adulthood without access to financial assets or foundational financial education.
As a result, many begin working without understanding the value of a 401(k), long-term investing or how small, consistent contributions can grow over decades. The result is a head start for some and a delayed starting line for others.
That is why proposals for child investment accounts are generating renewed conversation around early wealth-building and financial capability.
The Trump Accounts or 530A accounts create $1,000 pre-seeded investment accounts for children at birth. The broader principle behind them is straightforward: The earlier investing begins, the more powerful its long-term impact can be.
Educational tools should accompany these accounts. Free educational programs such as the SIFMA Foundation's Family InvestQuest™ and Summer Stock Market Game™ can help families build financial knowledge alongside saving and investing habits.
The power of time in investing
One of the simplest truths in finance is also one of the most important: Time is an investor's greatest advantage. The reason is compound growth — investment returns generating additional returns over time.
Consider a simple example. If $1,000 were invested at birth and earned an average annual return of 7%, that single deposit could grow to roughly $3,400 by age 18 without adding another dollar.
If family members contributed an additional $50 per month, the account could grow to about $25,000 by age 18.
If those contributions continued into adulthood, the balance could grow to more than $500,000 by age 59½.
The lesson is clear: Starting early often matters more than investing large amounts later.
But access to that early starting point is not equal for all families.
The growing conversation around early asset-building
Policymakers and financial educators have increasingly explored ways to expand access to investment accounts earlier in life.
Proposals for child investment accounts are built around a simple concept: Create an investment account at birth, provide an initial deposit and allow families, friends or employers to contribute over time.
Similar programs have been tested in several states and cities. Research highlighted by the Milken Institute suggests these child savings accounts or child development accounts are associated with improved financial security, stronger educational outcomes and higher long-term earnings potential.
Children with savings accounts are more likely to attend college, develop stronger savings habits and build greater financial confidence as young adults.
Even relatively small balances can grow meaningfully over nearly two decades. But the benefits might extend beyond the dollars themselves.
When children grow up knowing they have an investment account, they could begin to see themselves as participants in the financial system and future long-term investors.
Access and education must go hand in hand
Expanding access to investment opportunities is only part of the equation. Financial education is equally important.
Through programs such as the SIFMA Foundation's Summer Stock Market Game™ and Family InvestQuest™, families can learn the fundamentals of investing — including diversification, market volatility and long-term planning — in an engaging and accessible way.
Participants manage simulated portfolios using real market data while learning concepts such as asset allocation, risk management and long-term investing.
Research on SIFMA Foundation's financial education programs has found that participants demonstrate improved financial knowledge, greater confidence in investing and stronger engagement with economic concepts.
Such experiences can help demystify investing and prepare young people to make informed financial decisions and avoid when they begin managing real assets.
Financial education can also help young people understand the long-term impact of compounding and the value of beginning retirement investing early.
A step toward a more inclusive financial future
No single policy will close the wealth gap or solve decades of structural inequality. Financial security depends on many factors, including education, income stability, savings habits and access to financial tools.
But initiatives that encourage early asset-building and financial education represent a meaningful step forward. They expand participation in investing, introduce financial concepts earlier and allow time — one of the most powerful forces in wealth creation — to work in the next generation's favor.
For families, the lesson is simple: The earlier conversations about saving and investing begin, the greater their long-term impact can be.
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