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Trump Accounts for Kids: Who Qualifies for the ‘Free Money’ and How to Sign Up
By Adam Hardy MONEY RESEARCH COLLECTIVE
Here’s what parents (and future parents) need to know about these investment accounts for kids.
***Money is not a client of any investment adviser featured on this page. The information provided on this page is for educational purposes only and is not intended as investment advice. Money does not offer advisory services.***
The Trump administration is preparing to roll out a first-ever federal investment account for kids that aims to help the next generation of Americans build a nest egg by giving them exposure to financial markets at a young age.
During the Super Bowl, tens of millions of Americans caught a glimpse of what’s to come. In a 30-second ad, the advocacy group Invest America promoted the wealth-building perks of the accounts, which are slated to launch July 4. The commercial hinted that millions of accounts will be pre-funded by the government.
“That’s free money,” said one boy in a paint-stained T-shirt as a group of kids frolic behind. Several other kids in the commercial said that the accounts can help them reach their dreams of homeownership, entrepreneurship and college education.
In recent remarks to Congress, Treasury Secretary Scott Bessent referred to Trump Accounts as “the defining policy” of Trump’s presidency — and of America’s 250th anniversary later this July.
“They mark a singular moment in economic history by expanding the benefits of private ownership and compound growth to all Americans,” Bessent said.
Here’s what to know about the highly anticipated accounts, and whether they will live up to the hype.
What are Trump Accounts?
Newly created by the One Big Beautiful Bill Act, Trump Accounts are free, tax-deferred investment accounts for kids, similar to custodial brokerage accounts and individual retirement accounts, or IRAs.
While the program is overseen by the U.S. Department of the Treasury, the accounts themselves will be administered by private, commercial banks.
Parents will be able to open the accounts for any child with a Social Security number, but for children born between Jan. 1, 2025, and Dec. 31, 2028, the Treasury Department will fund the accounts with a one-time deposit of $1,000 per eligible newborn. Not every child with an account will receive the incentive.
How do Trump Accounts work?
At first, the accounts work like a custodial brokerage account. That is, parents can open them up on behalf of their children and act as custodians of the accounts until the child turns 18. This period is known as the “growth period.”
At this stage, parents, friends and even employers can contribute up to a combined $5,000 per year into the investment accounts. This limit may increase annually based on inflation. Withdrawals from the account are restricted.
In addition to the federal government’s $1,000 seed money, donors and state or local governments can also contribute to the accounts, and that sum will not count against the $5,000 annual limit.
The contributions must be invested in low-cost index funds or exchange-traded funds that broadly track the U.S. stock market.
The core idea behind the account is to leverage time in the market and compound interest for years — even decades — to turn initial contributions into substantial sums once the children come of age.
On Jan. 1 of the year the child turns 18, the account leaves the growth period, ownership is transferred to the child, and the account essentially becomes an IRA, beholden to similar withdrawal rules.
For instance, the funds can be used penalty-free for education (including job training), a home downpayment of up to $10,000 or expenses related to starting a business. The initial investment restrictions are also lifted, though contributions can only be made by the account holder.
Qualified withdrawals are taxed as ordinary income. But if the funds are used for other expenses, they are taxed as income plus a 10% withdrawal penalty. Like IRAs, the penalty goes away once the account holder turns 59 1/2.
Who qualifies for Trump Accounts?
Any child with a Social Security number qualifies for an account so long as a parent or legal guardian opens and claims it for them.
To benefit from the $1,000 seed money from the federal government, those birth date restrictions apply: Jan. 1, 2025, to Dec. 31, 2028.
“We’re going to leave every child with real assets and a shot at financial freedom,” President Donald Trump said at a recent event promoting the accounts. “All Americans will begin their lives with a beautiful nest egg.”
How much could Trump Accounts be worth?
Because Trump Accounts are designed to benefit from compound interest gains, they could produce some potentially eye-popping returns from relatively small contributions.
“Assuming historical growth rates continue,” Bessent said during a recent press conference, “a single $1,000 deposit at birth should grow to an estimated amount of at least half a million dollars by the age of retirement.”
While that statement is certainly possible, it is based on several assumptions that won’t apply to every account holder.
For example, the account holder would need to:
- Qualify for the government seed funding of $1,000.
- Invest in the S&P 500.
- Not touch the account for over six decades.
In that case — and assuming historical S&P 500 growth rates of about 10% apply — an initial contribution of $1,000 today could grow to nearly $750,000 over 67 years.
Of course, the real value of that nest egg will be far less due to nearly seven decades of inflation. Still, if parents, employers or local governments contribute, that sum could be much higher.
Not touching the money for 67 years is a major assumption, too. Once young adults get access to the funds at 18, the temptation to use the money will run high, and many will surely want to use at least some of the money for college costs or homeownership.
Alternatives to Trump Accounts
The biggest two comparisons to Trump Accounts are 529 college savings plans and custodial IRAs. Both accounts are opened by adults, usually parents or guardians, on behalf of children.
For 529 plans, contribution limits are much more flexible than Trump Accounts. Total lifetime 529 limits vary by state but are usually between $500,000 and $600,000. No annual limits apply. 529 plans also tend to have more flexible investment options, though they are set by individual states.
529 plan withdrawal rules are typically more flexible as well. When used on education-related expenses, 529 withdrawals are tax-free. That includes up to $20,000 for tuition or fees for K-12 schools and up to $10,000 for student loan repayment. Non-qualified withdrawals are subject to income taxes and a 10% penalty.
If there is leftover money after schooling, up to $35,000 may be rolled over into a Roth IRA as long as the 529 plan has been open for at least 15 years.
The other main alternative to Trump Accounts is the custodial IRA. Like Trump Accounts, these can be opened on behalf of minors — usually by their parents. The accounts can be either Roth (pre-tax) or traditional (after-tax), whereas Trump Accounts only allow for after-tax contributions by parents.
Regular $7,500 annual IRA contribution limits apply to custodial accounts, and investment options are as flexible as regular IRAs.
At 18, the young adult takes ownership of the account and can begin investing in it like a typical IRA.
Depending on the savings goal, both 529 accounts and IRAs boast clear advantages for flexibility with investment options and contributions.
However, these existing options lack one major perk of Trump Accounts: a $1,000 jumpstart contribution from the federal government for some newborns.
How to open a Trump Account
For now, the main way to sign up for a Trump Account is when you file your taxes.
The IRS released form 4547 for parents and guardians who wish to opt into the program. The form requires names, addresses, Social Security numbers and other basic information for each child associated with the account.
For children born within the date range for the $1,000 federal contribution, be sure to check box No. 7.
Each individual form has fields for only two children, but any number of children can qualify. For three or more children, use as many additional 4547 forms as necessary. Finally, attach the form(s) to your tax return and wait. The accounts and contributions will begin rolling out in the summer.
Once the program is fully up and running on July 4, trumpaccounts.gov will be accepting online applications as well, so there is no rush to apply during tax season. In the meantime, parents can enter their email addresses on the website to receive updates.
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Adam Hardy is Money's lead data journalist. He writes news and feature stories aimed at helping everyday people manage their finances. He joined Money full-time in 2021 but has covered personal finance and economic topics since 2018. Previously, he worked for Forbes Advisor, The Penny Hoarder and Creative Loafing. In addition to those outlets, Adam’s work has been featured in a variety of local, national and international publications, including the Asia Times, Business Insider, Las Vegas Review-Journal, Yahoo! Finance, Nasdaq and several others. Adam graduated with a bachelor’s degree from the University of South Florida, where he studied magazine journalism and sociology. As a first-generation college graduate from a low-income, single-parent household, Adam understands firsthand the financial barriers that plague low-income Americans. His reporting aims to illuminate these issues. Since joining Money, Adam has already written over 300 articles, including a cover story on financial surveillance, a profile of Director Rohit Chopra of the Consumer Financial Protection Bureau and an investigation into flexible spending accounts, which found that workers forfeit billions of dollars annually through the workplace plans. He has also led data analysis on some of Money’s marquee rankings, including Best Places to Live, Best Places to Travel and Best Hospitals. He regularly contributes data reporting for Best Colleges, Best Banks and other lists as well. Adam also holds a multimedia storytelling certificate from Poynter’s News University and a data journalism certificate from the Investigative Reporters and Editors (IRE) at the University of Missouri. In 2017, he received an English teaching certification from the University of Cambridge, which he utilized during his time in Seoul, South Korea. There, he taught students of all ages, from 5 to 65, and worked with North Korean refugees who were resettling in the area. Now, Adam lives in Saint Petersburg, Florida, with his pup Bambi. He is a card-carrying shuffleboard club member.