Trump Accounts for newborns: How should families use them?

By Bill Chappell

Published July 8, 2025 at 2:50 PM MDT

U.S. children born after Dec. 31, 2024, and through the end of 2028 will be eligible for Trump Accounts, seeded by $1,000 in federal funds. Families can add up to $5,000 each year until the year a child turns 18.

Millions of babies born in the U.S. in the coming years will be eligible to receive a $1,000 "Trump Account," courtesy of the federal government. The pilot program is a creation of President Trump's signature legislation that brings a host of changes to tax and spending programs.

Money in a Trump Account will be socked away until the year a beneficiary child turns at least 18. The idea is that the $1,000 in seed money will grow over time, invested in low-cost stock funds that track market indexes.

Trump Accounts will give children "the chance to experience the miracle of compounded growth and set them on a course for prosperity" from an early age, the White House says.

The new accounts have sparked a number of questions, including how they'll operate, how they compare with other savings strategies and what impact the accounts will have on America's gaping wealth divide, if any.

For financial experts, one benefit of a Trump Account is easy to spot.

"I'm going to take the thousand dollars, definitely. Nothing wrong with that," says Michael Reynolds, a certified financial planner at Elevation Financial in the Indianapolis area.

Here's a quick overview:

Who is eligible?

The program offers the $1,000 investment to children born after Dec. 31, 2024, and before Jan. 1, 2029. To take part, they must be a U.S. citizen with a Social Security number.

Each child's account will be "seeded with a one-time government contribution of $1,000," funding an investment that tracks a U.S. stock index, according to the White House.

The year the child turns 18, the funds become available to them.

Parents can also open a Trump Account for a child not born in the four-year window, but that account wouldn't be eligible to receive the $1,000 benefit.

Who can contribute to the account?

Parents, relatives and others can contribute up to $5,000 annually until the year the child turns 18.

Employers can chip in, though special rules apply to them.

A company can deposit up to $2,500 into an account for an employee's eligible dependent child without adding to the worker's taxable income.

That component could make a difference for parents who are under the financial strain that many young families face, says Alex Borgardts, co-founder of Next Bloom Wealth in Gladstone, Mo.

"And I think from an employer standpoint, that helps retain good employees," he adds.

How does the money grow?

The money must be invested in an "eligible investment," such as a mutual fund or exchange-traded fund (ETF) that tracks an index like the S&P 500, the legislation states.

The fund cannot have annual fees and expenses of more than 0.1%. The index it tracks must comprise "equity investments in primarily United States companies," it adds.

The requirement "is a sound way to approach investing for a minor child," says Borgardts. He adds that the plan calls for the $5,000 yearly maximum contribution to be indexed for inflation, meaning that this limit should go up over time.

The legislation designates that Trump Accounts will be treated as individual retirement accounts, which provide tax advantages for saving for retirement.

How much could the accounts be worth in the future?

"It depends on the rate of return," Reynolds says. "So I'm just going to grab my compound calculator here."

To come up with an estimate, he suggests using a rate of 8% — one of the benchmarks that advisers use to calculate annual growth typical in many stock market investments — to project how much money will be in the account.

If the government puts in $1,000 and no other money is contributed, Reynolds says, "fast-forward 18 years at an 8% rate of return — that's going to give you just shy of $4,000."

But families that can contribute the maximum $5,000 each year will reap far more benefits. At the same 8% rate, maxed-out accounts would be worth more than $190,000 after 18 years of contributions, according to Reynolds.

In reality, parents are unlikely to deposit that much in their child's account every year, says Ashley Dickson, the other co-founder at Next Bloom Wealth.

"If you just look at some of the accounts that are available for minor children today," she says, "families are not contributing [$5,000] today" on average, annually.

An earlier version of the plan required Trump Account holders to liquidate their accounts by the year they reach age 31, but that was not in the final legislation.

How does a Trump Account stack up to other options?

The new accounts join a crowded landscape of options that parents must navigate if they want to give their children a financial boost, including 529 plans for education expenses, UTMA accounts (named for the Uniform Transfers to Minors Act) and standard brokerage and Roth accounts.

"That's where the planning takes place," depending on how the funds will be used, Borgardts says.

If a family prioritizes higher education, he says, "it may be more beneficial for the parent to use a 529 savings account because of the tax treatment of those distributions."

On the other hand, Dickson says, a Trump Account brings another option as families decide how to budget their money, to help their kids' goals in education or homeownership.

"It's not 'I have to contribute to one or the other,'" she says of the range of savings options. "It's taking the amount that you can afford and maximizing it based on what the knowns are today, with the flexibility of changing tomorrow [or a] couple of years from now."

While the Trump Account is unique in giving cash to a newborn, it brings comparatively few tax advantages, the nonprofit Tax Foundation says.

"Trump Accounts provide a more limited and restricted tax benefit than existing saving incentives, such as 529 accounts," the group says.

How will accounts for kids affect the wealth gap?

In a way, Trump Accounts resemble "baby bonds," a bipartisan idea to help children who are disadvantaged by the racial wealth gap. But critics say Trump Accounts don't go far enough to prioritize helping families with fewer resources.

"The $1,000 seed in and of itself isn't the problem," Darrick Hamilton, an economist at the New School who co-wrote an influential paper about baby bonds back in 2010, says. "But let's be real. A thousand dollars, even if garnering interest over time, is not going to provide enough to satisfy what's needed for a down payment to get into an asset to build wealth."

"The problem is, who has resources to save in the first place, but those that are already wealthy?" he adds.

Noting that Trump Accounts are designed to exclude many immigrants, Hamilton says that in his view, the program "structures inequality." Because of that, he adds, the program runs the risk of missing an opportunity to change the relationship between the government and lower-income families.

Corrected: July 10, 2025 at 12:18 PM MDT

A previous version of this audio story included information that was in an earlier version of President Trump's major tax and spending legislation but was removed before final approval. Because of that, the story incorrectly said that withdrawals from “Trump Accounts” will be taxed at capital gains tax rates. In most cases, an account’s earnings will be taxed at the same rates as regular income. In addition, the story incorrectly said that half the money in an account can be withdrawn when a child turns 18, that the remaining amount becomes available at age 25, and that all the money must be taken out by the year the account holder turns 31. In fact, account holders can access all the funds at age 18.