A New Opportunity to Invest in Your Children or Grandchildren's Future: Understanding Trump Accounts
One of the most meaningful gifts you can give a child is the opportunity to build long-term financial security. A new savings option, known as a Trump Account, is designed to encourage investing from an early age while helping families build wealth for the next generation.
Created under recent federal legislation, Trump Accounts are tax advantaged investment accounts for children under age 18. Children born between January 1, 2025, and December 31, 2028, may also qualify for a $1,000 federal seed contribution, giving them a head start before family members contribute a single dollar.
One feature I particularly like is the ability for grandparents and other family members to contribute directly to a child's future. Families can collectively contribute up to $5,000 per year, turning birthdays, holidays, and other special occasions into opportunities to invest rather than simply purchasing gifts that may only be enjoyed for a short time.
It is important to note that while grandparents, relatives, and friends can contribute to a child's Trump Account, only a parent or legal guardian can open the account and serve as the custodian. Grandparents cannot establish the account themselves.
The accounts are designed with long-term investing in mind. Assets are invested in low-cost U.S. stock index funds and are intended to remain invested until adulthood. At age 18, the account transitions under rules similar to a traditional IRA, encouraging decades of compounded growth while teaching the value of patience and disciplined investing.
For many families, this creates an opportunity to leave a lasting financial legacy. Even modest annual contributions can grow significantly over time, especially when invested over 18 years or longer.
One reason I'm encouraging eligible families to open these accounts, even if they do not plan to contribute much initially, is that having an account established allows it to receive future philanthropic contributions if they become available. The U.S. Treasury has created a process that allows charitable organizations and private donors to contribute publicly traded stock to Trump Accounts.
Several organizations have already announced plans to participate. For example, Michael and Susan Dell have pledged billions of dollars to help fund Trump Accounts beyond the federal seed deposit, and other companies and philanthropists have announced similar initiatives. Some programs may focus on children below a certain age or those living in lower income communities rather than limiting eligibility to newborns.
While Trump Accounts are an exciting new planning opportunity, they are not a replacement for every savings strategy. Families whose primary goal is saving for education may still benefit more from a 529 plan because of its education specific tax advantages. Instead, Trump Accounts should be viewed as another tool that can complement an overall financial, tax, and estate planning strategy.
As with any new legislation, additional guidance from the Treasury Department and IRS is still expected. Before opening an account or making contributions, it is important to understand how it fits into your family's broader financial goals.
The process to open a Trump Account is now ready and is very straightforward. The child's parent or legal guardian simply downloads the app to their phone and completes the application. I recently opened an account for my daughter, and the entire process was simple, intuitive, and only took a few minutes.
Trump Accounts offer tax deferred growth on earnings and provide tax free withdrawals when distributions are qualified. Contributions may include after tax family contributions, pretax employer contributions, and a onetime $1,000 federal contribution for eligible children born between 2025 and 2028.
Under current tax law, withdrawals prior to age 59½ may result in a 10% IRS penalty tax, in addition to current income tax, and may be restricted until the child reaches age 18. Annual contribution limits and other restrictions apply.
Some Trump Account rules and regulations are still forthcoming from the U.S. Treasury and IRS.
Investing includes risks, including fluctuating prices and loss of principal. Mutual fund value will fluctuate with market conditions, and it may not achieve its investment objective.
ETFs trade, like stocks, are subject to investment risk, fluctuate in market value, and may trade at prices above or below the ETF's net asset value (NAV). Upon redemption, the value of fund shares may be worth more or less than their original cost. ETFs carry additional risks such as not being diversified, possible trading halts, and index tracking errors.
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. All indices are unmanaged and may not be invested into directly.
Sources: https://www.irs.gov/trumpaccounts https://www.axios.com/2026/07/18/trump-accounts-for-kids-what-to-know-how-sign-up https://www.fidelity.com/retirement-ira/530a-trump-accounts
