A Plan to Help Harlem Students Build Wealth: Start Them Off With $10,000

NEW YORK — A New York City nonprofit group, flush with millions in private capital, is piloting a first-of-its-kind savings program to address the racial wealth gap — by giving thousands of students in Harlem $10,000 each to invest.

The Harlem Children’s Zone, an influential anti-poverty organization, said it is raising $300 million for an initiative called Wealth Builds that will launch in Upper Manhattan, where the group operates, and expand to 10 other cities, including Atlanta and Minneapolis.

The group said it has already raised enough money to provide the funds to more than 2,200 youths: the entire student body at two charter schools it runs called Promise Academy, from kindergarten to 12th grade.

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And most of the students don’t know it yet.

“The parents will definitely lose their minds,” Kwame Owusu-Kesse, the nonprofit’s CEO, said with a smile, after a tour of one of the schools.

A kindergartner enrolled this year in the program could expect the $10,000 allotment, which will be controlled by professional money managers, to accrue interest of about 5% a year, Owusu-Kesse said. At the age of 25, the student could have roughly $26,000 in savings.

Admittance into the Promise Academy schools is decided through a lottery system with preference given to the local district, which is predominantly lower income.

The fund, Owusu-Kesse said, is an acknowledgment that education alone cannot bridge the gap in wealth, which has been growing along racial lines for decades. The median family income at a nearby public housing complex, St. Nicholas Houses, where many of the students live, was about $18,000 a year, he said, far below the poverty line.

“What good is financial education, if you don’t have the assets to apply said education to?” he asked. “It’s the next logical step.”

The $10,000 grants, called Youth Opportunity Funds, will be invested on behalf of students who will only be able to access the full amount at the age of 25, after reaching milestones like graduating high school and college, and completing financial literacy courses. Students who don’t reach all the milestones would still be entitled to part of the money.

The program will eventually fund close to 10,000 students — about 5,000 who enroll in Harlem Children’s Zone schools or after-school programming, and another 5,000 across other cities, most of which have not yet been announced.

Recipients can only use the money for wealth-building purposes, like a down payment on a home, continuing education or business investment. To ensure that recipients spend the money appropriately, a board will be set up to review uses of the funds, Owusu-Kesse said.

Such a windfall could have dramatic effects.

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, a nonprofit research organization focused on upward mobility and equity.

Early access to capital is important because the wealth gap balloons over time. The typical younger Black family had median wealth of less than $1,000 in 2019, compared with more than $25,000 for a similar white family, according to research by the Federal Reserve. A more established white family, led by someone older than 55, had $315,000 in assets, compared with $54,000 for a similar Black family.

Darrick Hamilton, the founding director of the Institute on Race, Power and Political Economy at the New School, said the program is probably the largest private investment to address the country’s racial wealth gap, adding that he was excited about its potential.

“We look at wealthy people, and they already do this,” he said. “In some ways this is democratizing trust funds for others.”

The program bears similarities to the idea of baby bonds, a recent public policy in which investments are made on behalf of children for college or other goals, said Madeline Brown, a senior policy associate at the Urban Institute.

In the past decade, a number of states and the District of Columbia have proposed or implemented versions of the idea. Connecticut launched a baby bonds program last year in which $3,200 is invested on behalf of babies from qualifying lower-income families. A spokesperson for the state treasurer said about 13,300 children have been enrolled. Federal programs with similar aims are being considered in Congress.

Research on the long-term benefits of such programs is nascent, but promising, Brown said. Three academic simulations of baby bond programs projected that they could cut the racial wealth gap by more than half, she said.

The Harlem Children’s Zone plan differs in a few ways. Children selected to receive the $10,000 funds are also enrolled in a number of “cradle to career” programs that range from scholarship and loan assistance to retirement savings planning.

And no other program has the support of such a wide roster of deep-pocketed philanthropists. Harlem Children’s Zone’s board of trustees include billionaire investors Stanley Druckenmiller, Keith Meister and Ken Langone, a co-founder of Home Depot.

In a phone interview, Druckenmiller said he would manage, for free, half of the Youth Opportunity Fund, which has already raised more than $50 million. “I couldn’t be more excited about it,” he said, adding that the fund’s goal of 5% interest per year is “conservative.”

While the fund is promising, it has its limits, Hamilton said. “We cannot rely on the charitable inkling of wealthy people to get us out of this quagmire,” he said, noting that the goal should be to inspire a publicly funded model.

As to whether the funds are worth the cost, Owusu-Kesse said that the $10,000 investment reflects a small fraction of the price to put a New York City student through high school, and that the savings could have an outsize impact on their lives.

So far, only about 100 recent graduates of Harlem Children’s Zone schools have been informed that they will be included in the fund.

“My jaw dropped,” said Elijah Grace, 19, who is now studying engineering and applied physics, with a minor in music, at Morehouse College in Atlanta.

“To be a young person of color, to know that someone believes that much in you, that they would invest that much money, it’s honestly — I don’t know how to put it in words,” he said.

Harlem Children’s Zone had already awarded Grace a full scholarship to attend college, before he was told at a graduation ceremony last year that he would be part of the pilot program. But knowing that he will have funds waiting for him — perhaps $14,000 when he turns 25 — opens far more options for him, he said.

Most of the fund recipients will find out they are part of the program only after this story is published, Owusu-Kesse said.

Jadah, 17, who is graduating from a Promise Academy school in Harlem this year, said she was accepted to more than two dozen colleges and universities. (School staff asked that she not use her last name, because she is a minor.)

She was not yet aware that she would be part of the investment fund, but was excited about studying to become a psychiatrist. She has already been awarded an up to $15,000 annual scholarship for the school of her choice.

“I feel like I’m one step ahead,” she said.

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