What is the Trump Account for children? How much can family put into the account?

A $1,000 head start for newborns sounds great, but experts say this new savings account may not be worth extra contributions. 

Modified on:
July 9, 2025 7:45 pm

I’d like to introduce you to an investment in a whole new phenomenon on the horizon for families across America—something already being called the “Trump account.” Beginning in 2025, every single child born in America will be given a personal government investment account, with $1,000 as a beginning balance. Sounds pretty cool, right? But wait until you start plotting what to do with it before we talk about how it actually works—and whether it’s worth putting your own money into.

A $1,000 head start for newborns

And the twist: if your child was born between December 31, 2025, and December 31, 2028, then $1,000 will be added automatically to this new account. The expectation is to habituate children early to saving and investing—think college, first home, or even starting their own company one day.

Babies born before 2025 can also be provided with an account, but they will not receive the $1,000 seed fund. Therefore, this is indeed an incentive to the newborn babies of the next generation. 

How the Trump account works

These accounts can be created in any bank by families and are eligible for one child who is under the age of 18 years. There is a contribution limit of $5,000 per year, and an employer may also provide up to $2,500 tax-free to the parent.

What makes this account different is where the funds must be invested: they must be invested in a broad stock index. What that means is that it must rise and fall with the market as a whole—essentially the same manner as retirement accounts like 401(k)s or IRAs.

The funds in the account compound tax-deferred until they are withdrawn. They can use it at age 18 for eligible expenses like college, a first-time home down payment, or a business startup. And if they do use it for those things, the withdrawals qualify for the lower long-term capital gains tax rate. Or, if they withdraw it for something else? It’s taxed as regular income.

Is it worth contributing more than the $1,000?

That is where it becomes tricky. Financial advisors are not necessarily praising this program. There are others who claim the rules are too complex and the payback too modest in relation to other options available. Those include 529 college savings plans or Roth IRAs.

For example, 529 accounts enable you to withdraw the funds altogether tax-free for educational purposes, and Roth IRAs enable you to achieve tax-free income and withdrawals in retirement. The Trump account, on the other hand, still demands that you pay tax when you take out money—even for qualified uses.

So while the $1,000 government grant is certainly appreciated, most planners think that families might be better off retaining more liquid savings vehicles in their longer-term plans.

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A niche choice for some families

Still, there are some cases where the Trump account might make sense. If your family is already saving well for retirement and college, and you’d like another way to invest for your child’s future—especially for something like buying their first home—it might be a useful add-on.

But for most families, that $1,000 might be the only part worth celebrating.

Bottom line: it’s free money, so grab it—but don’t be reluctant to work on it a tad.

Emem Ukpong
Emem Ukponghttps://polifinus.com/author/emem-uk/
My journey to becoming a writer has been shaped by both science and finance. I began with a Bachelor's degree in Biochemistry, but I found myself drawn to the economic and financial sphere. I have collaborated with various organizations, creating articles and blogs about these essential topics. Currently, I cover financial trends, economic updates, and social welfare topics for Polifinus, ensuring that our content reaches those who need it most.

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