Good morning. It’s Monday. What if you had been given $10,000 to invest when you were 5 years old? Today we’ll find out about a program that is doing just that. Also, watch your inbox later this afternoon for our new Street Wars series on the battle for space on the streets of New York City.
It’s an intriguing idea: Give a student $10,000 to invest when he or she is as young as 5. Fast-forward to when he or she is 25 or so, and — thanks to professional money managers and accrued interest — there could be roughly two and a half times that amount to spend.
There are strings attached. The money can go only for projects that would add to the students’ net worth, like the down payment on a house or an apartment. Nothing frivolous.
A nonprofit called the Harlem Children’s Zone is raising private capital for the program, called Wealth Builds. I asked Stefanos Chen, a Metro reporter who writes about the job market and the changing business landscape in New York City, to explain the promise of the program.
Who will get the $10,000? How are the recipients being chosen?
The entire student body at two K-12 charter schools that Harlem Children’s Zone runs, called Promise Academy — about 2,200 students in all.
Most of them didn’t know until we published an article about the program last week. Only about 100 recent graduates of Harlem Children’s Zone schools had been told before that.
But that’s only $22 million — a lot of money, but less than 10 percent of the $300 million that Harlem Children’s Zone is looking to raise.
Yes. Harlem Children’s Zone has already raised over $50 million for these grants as part of a broader, multipronged initiative that they hope will roll out nationwide. The plan is to invest on behalf of about 5,000 students in New York City — including future students at the charters and children who are enrolled in the Harlem Children’s Zone after-school programs — and another 5,000 in 10 other cities, including Atlanta and Minneapolis.
Where is the money coming from?
Harlem Children’s Zone is an influential nonprofit in the education world — President Barack Obama created a federal grant program that replicated some of its antipoverty programs. That reputation has attracted wealthy philanthropists from across the political spectrum, including Stanley Druckenmiller and Ken Langone, billionaire investors who have backed Republican presidential campaigns. Druckenmiller, a hedge fund manager who was a protégé of George Soros, told me he will help manage the fund for free.
But the philanthropy approach has limits. Harlem Children’s Zone is hoping it will provide proof of the concept for state and federal government to join in or craft their own versions of the model.
Kwame Owusu-Kesse, the chief executive of Harlem Children’s Zone, says that education alone can’t close the racial wealth gap. Why is he emphasizing access to capital, which is what this program would provide?
Harlem Children’s Zone, along with a growing number of policymakers, would argue that education is vital, but so are the often unspoken advantages that many middle-class students receive from family: inheritances, trust funds and tuition support that give more affluent young people advantages in their early careers.
Think about the pipeline of students who can afford to take prestigious but low-paying internships after college. Or cash gifts from family that help many first-time home buyers afford a down payment.
That gap is especially clear along racial lines. For every dollar a typical white household had in 2022, a Black family had 16 cents, and a Latino one had 22 cents, according to the Urban Institute, an economic policy think tank.
That gap grows with age, making early access to capital even more important for young people trying to escape poverty.
There have been initiatives to pay for college tuition in the past that provide a certain amount of money when a child is very young — money that is set aside to accrue interest and be worth far more when the student can withdraw it. How does this differ?
Harlem Children’s Zone sees this as going beyond scholarship funds, which it already provides to many of its students.
The idea here is that the recipients, who cannot withdraw the funds until the age of 25, can only apply the money to wealth-building endeavors: a home down payment, a business venture, continuing education and a limited number of other purposes. Harlem Children’s Zone plans to set up oversight, including a board to ensure that the money is spent appropriately. And students must pass milestones, like graduating from high school and college and completing financial literacy courses, to obtain the full grant.
The depth of investment is also unusual. A kindergartner enrolled in the program will have 20 years for interest to accrue. At a conservative 5 percent interest rate, she could withdraw more than $26,000 in savings.
Where else has this program been tried? What have the results been?
The program has similarities to the idea of “baby bonds,” a policy that only really started to gain traction a decade ago. Last year, Connecticut launched a baby bonds program in which $3,200 is invested on behalf of newborns from qualifying lower-income families. About 13,300 children have been enrolled so far, and similar programs are being considered in Congress.
The idea is still fairly new, but researchers have projected some very promising results. Three academic simulations of baby bond programs estimated that they could cut the racial wealth gap by more than half.
But the key to these programs will be execution. The oldest students enrolled in the program won’t be able to access their investment for another six or seven years.
Weather
Expect a dry morning, as patchy fog gives way to sunshine and clouds, and temperatures climb into the high 60s, but there is a chance of showers this afternoon. Temperatures will drop to the mid-50s at night.
ALTERNATE-SIDE PARKING
In effect until May 27 (Memorial Day).
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Dear Diary:
Overjoyed at seeing a fantastic play on Broadway, I exited the crowded theater and headed for the curb.
As I stood there waiting for my husband to pick me up, I felt a gentle tug on my sleeve.
I turned to see a small older woman standing next to me and smiling.
“Are you crossing the street?” she asked. “Will you take me with you?”
“Oh, no,” I said, laughing. “You don’t want me to help you. I am legally blind!”
She replied that she could see but was terribly afraid of falling. If I held onto her as we crossed so she could get her bus, she would watch the traffic for both of us.
