A new investment vehicle called Trump Accounts has launched, providing a way for Americans to save for children’s futures. Approved by Congress as part of last year’s tax and spending law, these accounts are designed to assist individuals under 18 with the beginning of their adult lives, functioning similarly to retirement accounts but with a focus on early adulthood expenses.
Account Features and Contributions
Money within Trump Accounts will be invested in an index fund tracking the broader stock market. Individuals under 18 can have an account, with access to funds available upon reaching age 18 for purposes such as education or purchasing a home. While the funds can be used for other purchases, doing so incurs a tax penalty. The accounts are structured as a digital “donation bucket,” allowing contributions from various sources, including family members, philanthropists, employers, and the government. Contributions from family and others are made with after-tax dollars, while employer or government contributions are pre-tax. Taxes are only levied on the investment’s growth when funds are withdrawn.
Potential Financial Windfalls
For children born between 2025 and the end of 2028, signing up for a Trump Account offers a direct benefit: a $1,000 seed contribution from the federal government. Financial planners estimate this initial amount could grow to nearly $4,000 by age 18, assuming an 8% rate of return, before accounting for taxes on growth and the initial contribution. Children born before this period are not entirely excluded from potential benefits. Millions of children under age 11 may receive $250 from a donation of over $6.25 billion by Michael and Susan Dell of Dell Technologies. This specific donation is contingent on the child not qualifying for the federal contribution and the family residing in zip codes with a median family income below $150,000.
Corporate and Employer Involvement
Beyond government and philanthropic contributions, some companies are also offering support. Memory chip maker Micron is providing $250 to up to one million children living near its work sites in states like Minnesota, California, and New York, aiming to support local communities. Micron also plans to match employee donations to their children’s accounts, up to $1,000 per child. Other corporations, including Mastercard, Uber, and Visa, are offering similar matching programs for their employees. Small businesses are also exploring the new accounts, with some owners indicating plans to test their utility for employees’ financial futures.
Considerations for Parents
Financial experts advise parents to prioritize their own retirement savings before allocating funds to children’s accounts. Carrie Joy Grimes, CEO of WorkMoney, suggests maximizing contributions to personal retirement accounts first, as relying on children for financial support in retirement can create significant stress. While Trump Accounts offer potential benefits, they exist alongside existing options like 529 education plans. 529 plans allow for tax-free withdrawals exclusively for educational expenses, whereas Trump Accounts have broader usage allowances with a tax penalty for non-qualified withdrawals. For families in stronger financial positions, Trump Accounts may offer an additional tax benefit. For lower-income families, the primary advantage may be the accumulation of funds through a “digital donation bucket,” potentially providing a substantial financial start for adult life.
Helene Elliott is the senior reporter for News Raise. She covers Science news. She also has a keen interest in photojournalism. Helene holds a nomination for the prestigious Red Smith Award. She is married to author Dennis D’Agostino, a former publicist with the New York Mets.
