What Are Trump Accounts for Kids? A Simple Guide for Parents
The Trump Accounts are new tax-advantaged savings/investment accounts for children under 18, established under the One Big Beautiful Bill Act. For children born between January 1, 2025, and December 31, 2028, who get a social security number, the government will put a one-time $1,000 into their account. The money will be invested in a low-cost U.S. Stock Market index fund. The money is locked until the child turns 18 and then it converts to a traditional IRA.
Like President Trump or hate him, this is a great idea. Here's why:
There are approximately 65 million kids in the U.S. and out of that, 50 million would never open a retirement account. Now they will all own an account and benefit from the long-term growth of the U.S. economy. We all know that unless you own assets that compound, you will never be wealthy and never keep up with the cost-of-living increases.
Both Republicans and Democrats are on board. (not all, but most)
This is the largest consumer project in the history of the federal government.
This idea has caught fire and has now created a platform for change and reducing poverty. Michael and Susan Dell added 6 billion to the pot, resulting in another $250 given to children under the age of 10. As more corporations, States and individuals jump on board, these contributions will increase.
Half of Americans have lost faith in the "system" and checked out. This gives hope and a starting point for millions.
People have lost faith in contributing to many "non-profits" as the data shows a tiny portion of the money donated actually makes it to the intended cause, with the majority going towards giant administrator salaries, etc. I am an advocate of some non-profits, but many are by no means efficient, hence why I feel more people will contribute directly to funds like the Trump Accounts, where 100% of the proceeds will be invested directly into children's accounts.
Teaches kids about math. As kids mature and track the worth of their account they will be interested in terms like compound interest, rate of return and the overall health of the U.S. economy. They will be more likely to believe in the American Dream if they have skin in the game.
Criticisms that have been brought to my attention:
1) "This makes rich people richer by putting more money in the market".
2) "If everyone gets an account that's like no one getting an account"
3) "This is billionaires appeasing the President".
My Opinion:
1) The rich are already rich and will continue to get richer, whether this program exists or not.
2) $1,000 compounded is significantly more than $0 compounded. There is plenty of money circulating in the U.S. economy, this program is an excellent place to put a percentage of it.
3) Sure, if you are a billionaire contributing to this program you may be in Presidents Trumps good graces. I highly doubt billionaires need President Trumps approval to sleep well at night. I would wager that most billionaires are great at math and see the positive effects of a program like this.
The Math:
A kid starts with $1,000 at birth and an employer or Mom/Dad adds $750 per year. That equates to $50,000 at the age of 18, $150,000 at age 30 and $1,000,000 at the age of 55. (using the 75-year track record of the S&P 500)
The Future:
As this catches fire, it will trickle down to everyday folks that contribute to causes like adopting a grade at their school or contributing to the accounts of children in their home state. Small contributions will add up. A tech giant will then create a platform for the public, that will provide up to date investment data on these children, and I believe the results will be staggering.
The Takeaway:
Going from nothing to something, from 0 to 1 is a far bigger move than going from 1 to 3. I came from very little; I can attest to the power that comes from feeling hopeful. As millions of kids move from a 0 to a 1, we will witness an American Dream that is alive and real.
Suggested Reading:
Asset Army: Wealth That Earns While You Sleep
Dear Johnny Q&A: How Much Should I Contribute to My 401k?
Invest $1 a Day and Keep the Poor House Away