Wealth inequality starts at birth. Lawmakers debate whether child savings accounts can help

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An unequal distribution of wealth in the U.S. can make it so some children are behind from birth. Now lawmakers are considering whether federal children's savings accounts can help. One proposal — the 401Kids Savings Act — would create savings accounts for all newborns. Low- and moderate- income families would receive federal contributions if their modified adjusted gross incomes falls under certain thresholds. Children in households that qualify for the earned income tax credit would receive additional aid. All families would be eligible to contribute up to $2,500 per year. By the time some children turn 18 — particularly a qualifying low-income newborn born to a single parent — up to $53,000 may be accumulated for their benefit, according to the proposal. Children's savings accounts are currently available statewide in seven states — California, Illinois, Maine, Nebraska, Nevada, Pennsylvania and Rhode Island. At the end of last year, there were 121 children's savings account programs in 39 states serving 5.8 million children. More from Personal Finance: As Social Security's funds face insolvency, here's what to watch Why most of Warren Buffett's wealth came after age 65 Advice about 401(k) rollovers is poised for a big change. Here's why The programs are aimed at helping to reduce unequal wealth distribution among American child households, which research shows is prevalent among Black and Hispanic households as compared to white households. "All the evidence from existing programs shows that money not only unlocks opportunities for kids, it's a smart investment that goes right back into the economy down the road," Sen. Ron Wyden, D-Oregon, and chairman of the Senate Finance Committee, said at a Tuesday hearing. However, implementing a federal program may come with significant costs to taxpayers, said Sen. Mike Crapo, R-Idaho, who is the ranking member on the committee. "Expanding options to save is a worthy goal, but we must do so in a way that does not exacerbate already out-of-control government spending, or create another unsustainable government program," Crapo said.