Clinton's $20 Billion 'Baby Bond' Idea Is Overkill

Simple personal finance classes could increase savings for far less cost.

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Hillary Clinton is mulling over the idea of giving every child born in the United States a $5,000 "baby bond" from the government to help pay for future costs of college or buying a home. During a recent forum hosted by the Congressional Black Caucus, Clinton argued that wealthy people "get to have all kinds of tax incentives to save, but most people can't afford to do that." (GOP presidential hopeful Mitt Romney pushes an alternative approach, making all middle-class saving completely tax free.)

Now, while the Democratic front-runner may know a thing or two about cattle futures, she clearly is no personal finance expert—at least based on those comments. Almost all financial advisers will tell you that the "I can't afford to save" gripe is one of the great money myths they frequently run across. As fund giant Fidelity explains on its website: "Do you buy a cup of coffee or a newspaper every day? If so, don't underestimate what even a little bit of money can do over time. Think about how much the cost of that cup of coffee can add up to over the years!"

That's right. A $3 or so Starbucks coffee—every day, every week—could easily add up to $1,000 a year. Invest that and let the miracle of compounding interest take over, my java-addicted friends. But what about the poor in America, you might ask, who don't regularly hit the local high-end coffee shop? Can they afford to save? Well, as the Census Bureau notes, 76 percent of poor households have air conditioning, 30 percent own two or more cars, 97 percent have a color TV, 78 percent have a VCR or DVD player, and 62 percent have cable or satellite TV. It's pretty clear that they, and pretty much everybody else for that matter, could save more if they chose to.

So how about this: Instead of spending $20 billion a year on baby bonds and creating a new unfunded entitlement, maybe we could spend a tiny fraction of that amount on proper personal finance education in high schools across America. Indeed, a 2007 survey by the National Council on Economic Education found that only seven states require students to take a personal finance course as a high school graduation requirement, and only nine states require the testing of student knowledge in personal finance.

The potential return on investment from greater financial education could be huge. And you know how presidential candidates love to visit high schools? Maybe if they have a few extra minutes after boring a thousand teens in the school gym, they could attend one of these new personal finance classes and learn a thing or two.