A New Investment Account for Kids: Trump Accounts

Most of you have probably heard about Trump Accounts by now, and millions of families have already signed up. I opened accounts for my own kids, and I found the process through the Trump Accounts app to be straightforward and easy to use.

A Trump Account is a new type of investment account designed to help children get an early start saving and investing. An account can generally be established for a child under age 18 with a valid Social Security number. Probably the most enticing feature is that the federal government will make a one-time $1,000 contribution for eligible U.S. citizen children born from 2025 through 2028. My kids don’t qualify, but older children can have accounts too, they just won’t get the $1,000 federal contribution.

One of the things I like most about Trump Accounts is that there are potentially a lot of ways for them to be funded. Parents, grandparents, friends and other family members can contribute. Employers can also participate, including making qualifying contributions for an employee or dependent. Generally, employer and individual contributions are subject to a combined $5,000 annual limit, which will be adjusted for inflation after 2027.

There may also be money available that doesn’t come from personal contributions. Governments and qualifying charitable organizations can make contributions to groups of children, and those contributions generally don’t count toward the normal $5,000 limit. For example, Michael and Susan Dell committed $6.25 billion to provide $250 contributions to as many as 25 million children who meet certain age and geographic requirements. So, even if parents or grandparents don’t plan to contribute much themselves, there could still be good reason to establish an account.

The investment choices are intentionally simple. While the child is under 18, money generally must be invested in a low-cost mutual fund or ETF tracking a broad index of primarily U.S. stocks, such as the S&P 500. Fees are also limited, helping keep costs low.

Withdrawals generally aren’t allowed during this initial growth period, reinforcing the idea that this is money intended to stay invested for the long term.

Trump Accounts don’t necessarily replace other ways of saving for children. A 529 plan still has significant advantages when the primary goal is education, particularly because investment growth and qualified withdrawals can be tax-free. An UTMA/UGMA custodial account offers much greater flexibility. Money can generally be invested in a wider variety of investments and used for the benefit of the child, but the child eventually gains control of the account.

Trump Accounts have more restrictions on investments and access to the money, but again, one of the most appealing aspects is the possibility of contributions from the federal government, employers, philanthropists and other outside sources.

So, if you have other accounts already established for your kids, you may still consider opening a Trump account.

In addition to the details I’ve described, one of the things I like best and feel is the most important aspect of these new accounts is that they will get many kids who otherwise would likely not invest to start. The app also has a simple Learn section to help teach kids about investing.

Giving a child an investment account at a young age creates a reason to talk about stocks, investing, compound growth and patience. They can watch their balance grow, see that markets sometimes go down as well as up, and begin to understand why investing consistently and staying invested for a long time can be so powerful. Not every child is going to become fascinated by investing. But if having an account sparks some interest and helps a young person begin saving and investing earlier than they otherwise would have, that could ultimately be worth far more than the initial dollars contributed.

It should be noted that some of the rules and administrative details surrounding Trump Accounts are still being worked out, and I expect we’ll learn more as the program develops. But overall, I think they’re worth considering. Between the potential for contributions from a variety of sources and the opportunity to introduce kids to investing early, I think there’s a lot to like.