"Baby bonds" have become one proposal to help close the racial wealth gap between Black and white families in the United States. Unlike regular bonds, they're not a debt instrument traded in the public markets. Instead, the policy proposal creates a federally funded trust fund account for every newborn baby in the U.S. "I support this idea called baby bonds," Sen. Cory Booker, D-N.J., told CNBC. Booker has proposed a baby bonds policy called the American Opportunity Accounts Act, which has been co-signed by many of his Democrat colleagues.

When the child turns 18, depending on their families' income, they could have nearly $50,000 in this account. If the child comes from a well-off family, they'd end up with just over $1,600 by age 18 since they wouldn't be getting annual payments. Watch the video above to learn more about how baby bonds could work, the economics behind the proposal, and what may be next for these policies on the federal and state levels.

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Should the U.S. give every baby $1,000 at birth?