As of July 4th, families have a new savings option for kids: Trump Accounts. Created under federal legislation and rolled out by the Treasury, they're built for long-term investing, not day-to-day expenses.
The basics
A Trump Account is an investment account for any child under 18 with a Social Security number. The child owns it, while a parent or guardian manages it until adulthood. The money must stay in low-cost funds tracking broad U.S. stock indexes (no picking individual stocks or bonds). And the money can't come out until January 1st of the year the child turns 18. At that point, the account converts to something that works for them, like a traditional IRA.
The $1,000 seed money
Kids who are U.S. citizens born between January 1, 2025, and December 31, 2028, receive a one-time $1,000 deposit from the Treasury if the account is set up. That $1,000 doesn't count against the annual contribution limit below.
Who can add money, and how much?
Parents, grandparents, other family, and even employers can contribute up to $5,000/year combined per child. No earned income requirement and no income phase-outs. One thing to flag for clients: contributions aren't tax-deductible going in, and withdrawals are taxed as ordinary income later. Unlike a Roth IRA or the tax-free treatment that a 529 plan offers for education expenses. It's tax-deferred growth, not tax-free.
How it stacks up against a 529 plan
A 529 plan is built for education costs and offers tax-free withdrawals when used that way. A Trump Account is built for long-term investing — closer to a retirement account than a college fund. If college is the priority, a 529 plan still wins on the tax side. If you want something to run alongside it for broader long-term wealth-building, a Trump Account fills that gap.
Should you use one?
It depends on the goal:
- If college is the main focus → stick with a 529 plan
- Want more flexibility? → a custodial brokerage account might be a better fit
- Want a dedicated long-term investment for the next generation? → a Trump Account can complement either of the above
For most families, the real value isn't the $1,000 — it's the head start on decades of compounding and an easy way to get kids thinking about investing early. If you have kids, or grandkids, and want to talk through whether this fits your plan, let's set up time to go through it together.
Investors should consider the investment objectives, risks, charges, and expenses associated with municipal fund securities before investing. This information is available in the issuer's official statement and should be read carefully before investing.
Investors should also consider whether the investor's or designated beneficiary's home state offers any state tax or other benefits that are available only for investments in that state's 529 Plan. Any state-based benefit should be one of many appropriately weighted factors in making an investment decision. Investors should consult their financial, tax, and legal advisors before investing in any state's 529 Plan.