Trump Accounts for Kids: How Do They Stack Up?

In President Donald Trump's "One Big Beautiful Bill Act", the federal government introduced a new way to save for children’s futures: the Trump Account.

This investment account gives parents a way to save and invest for their children, and kids who meet certain requirements may qualify for seed money up to $1,000.

But a Trump Account may not be a superior replacement for existing investment tools just yet.

What is a Trump Account?

A Trump Account is an investment account designed to give children a head start financially. Money contributed to these accounts gets invested in the stock market.

The Trump Accounts Contribution Pilot Program starts eligible kids off with a one-time $1,000 credit. The money comes from the Department of the Treasury.

In addition, various philanthropists have pledged money to support Trump Accounts. Dell Technologies founder Michael Dell and his wife, Susan Dell, for instance, recently pledged to deposit $250 into 25 million Trump Accounts, totaling $6.25 billion. Their deposits will target children 10 and under who don’t qualify for the $1,000 Treasury seed money, and who live in areas with a median household income below $150,000.

Several employers have also reported that they will match some contributions for employees.

Who qualifies?

To be eligible to have a Trump account, a child must:

• Be under 18 and not turning 18 in the calendar year in which the account is opened. 

• Have a Social Security Number.

To be eligible for the $1,000 credit under the pilot program, a child must:

• Be born between Jan. 1, 2025, and Dec. 31, 2028.

• Be a U.S. citizen.

• Have a Social Security number.

How do Trump Accounts work?

Getting started

Starting this year, parents can use IRS Form 4547 to create an account for an eligible child. Or starting in summer 2026, they will be able to create an account on TrumpAccounts.gov.

How do contributions and withdrawals work?

Contributions made before the calendar year in which the beneficiary turns 18 are limited to $5,000 per year. Employers can contribute up to $2,500 per year to accounts, which won’t count as income for the parents or children — but does count against the annual account limit.

Trump Account withdrawals aren’t allowed before the first day of the calendar year the child turns 18.

Contributions made in the year the child turns 18 or after generally follow traditional IRA rules. The IRA contribution limit in 2026 is $7,500 for those under age 50. The money invested grows tax-deferred, and withdrawals are taxed as ordinary income. (After-tax contributions can be withdrawn tax-free, so keep good records.)

There’s a 10% penalty for withdrawing money from an IRA before age 59 ½, unless there’s a qualifying exception, such as homebuying or paying for higher education expenses.

What about taxes?

Contributions made to Trump Accounts before the child’s 18th birth year must be made with after-tax dollars, which means no tax deduction for parents, said Jacob Martin, a certified financial planner in Columbus, Ohio, in an email interview.

Contributions made during the 18th birth year and after could be deductible, as the account converts to a traditional IRA on that date.

Employers can contribute up to $2,500 per year tax-free to the Trump Accounts of their employees or their dependents, and this amount is slated to be adjusted for inflation starting after 2027^[0]

How do they compare with existing investment vehicles?

Trump Accounts have perks, but there are other long-term investment and college savings strategies that bring more to the table, financial experts say.

Trump Accounts resemble traditional IRAs, except contributions made before the beneficiary’s 18th birth year aren’t deductible and have a lower annual cap. Unlike an IRA, there’s no earned income requirement to start.

Brokerage accounts, including UTMA & UGMA custodial accounts, don’t have contribution or withdrawal limits.

A 529 plan offers more flexibility than a Trump Account when it comes to who can open an account and use the money. For example, account holders can change beneficiaries, or roll funds from one family member’s plan to another.

While the exact amount varies by state, contribution limits for 529 education savings plans are high. Contributions grow tax-free, and withdrawals are tax-free when made for qualifying expenses. Some states offer residents tax deductions for contributing. You can also roll over unused money, up to a certain amount, into a Roth IRA.

How do you invest within a Trump Account?

During the "growth period" of a Trump Account, when the beneficiary is under 18, the account can only be invested in low-cost ETFs and mutual funds that track a broad-market index of U.S. stocks, like the S&P 500. There will be no way to invest them in bonds or international stocks until the beneficiary turns 18, at which point the account converts to a traditional IRA and the investment restrictions come off.

If you’re a parent, these investment restrictions present you with a conundrum. When investing for major future expenses, like a child’s college tuition, financial advisors generally recommend building a diversified portfolio made up of high-risk, high-growth investments (like stocks) and more conservative investments (like bonds).

The best practice, broadly speaking, is to invest the portfolio heavily in stocks early on to maximize growth, and then gradually make it more bond-heavy to minimize risk as you approach the year when you’ll start withdrawing money from it. But Trump accounts are stock-only. So how do you diversify them?

“You basically can’t, and that’s the point,” AJ Ayers, a Brooklyn-based certified financial planner, said in an email interview. Ayers noted that the investment restrictions on Trump accounts aren’t a big problem during the beneficiary’s infancy and early childhood.

“A newborn has an 18-year minimum lockup and a 40-plus-year horizon if it rolls into an IRA. That’s exactly the runway you want fully invested in stocks. Total U.S. market fund is my preference over S&P 500 because you pick up small and mid-caps,” she said.

But things get more complicated as your child approaches adulthood. If your plan is to use the Trump account to pay for their college expenses, conventional wisdom says that you should make your investment mix more conservative over time. Given the investment restrictions on Trump accounts, that will require some creative thinking.

Diversifying by pairing Trump Accounts with other investment accounts

“Though an investor can’t properly diversify this specific account, they can offset it if they have other investments,” Acie Clayborne, an Ohio-based accredited financial counselor, said in an email interview. “Families can somewhat mitigate the limitations of Trump accounts by pairing them with 529s if they happen to have enough savings,” Clayborne said.

In other words, you can diversify your child’s overall college savings portfolio across multiple accounts if you have them. 529 college savings plans don’t have the same investment restrictions as Trump accounts, so one workaround is to shift their allocation heavily toward bonds as your child approaches college age.

Moving from aggressive to conservative equity funds over time

But what if the Trump account is your family’s only college savings vehicle? Clayborne pointed out that different types of stock indexes have different levels of volatility, and moving between these might be one way to invest a Trump account a little more conservatively over time.

“The best most people can realistically do is to shift between market caps over time, moving between large cap, mid cap, etc or even between growth versus value strategies,” he said. Small-cap stocks tend to be higher-volatility than large-cap stocks, and growth stocks tend to be higher-volatility than value stocks.

With this in mind, an investor could make their Trump Account's portfolio more conservative over time by gradually shifting from small caps to mid caps to large caps, or from growth stocks to value stocks, as the beneficiary approaches college age.

Treating Trump Accounts as starter IRAs, not college savings plans

Another option is to think long-term (that is, beyond college). Your child will also need to start saving for retirement at some point in their life. Ayers said that another potential use case for Trump accounts is as a “starter retirement account,” rather than as a college savings vehicle. In that case, the stocks-only-until-age-18 restriction isn’t really a problem.

“Once it flips to a traditional IRA at 18, all the investment handcuffs come off. Bonds, international, REITs, target-date funds, whatever you want,” she said.

“In the year the kid turns 18, while they’re still in a near-zero tax bracket, do a Roth conversion. You pay almost nothing in tax now and lock in decades of tax-free growth. From there, it’s a standard glide path. Heavy equities through their 30s, start layering in bonds and international through their 40s and 50s, land somewhere around 60/40 by retirement,” Ayers said.

Is a Trump Account worth it?

If your child can get the $1,000 credit, consider it, Robert Persichitte, a CFP in Arvada, Colorado, said in an email interview.

“If it's free money, great. Take what you can get,” he said.

A Trump Account gives children the ability to start investing early with a little seed money. It could help establish a fund your kid could put toward buying a home or starting a business someday.

But for most taxpayers, Roth IRAs and 529 accounts are likely the better options because they offer much better tax savings, Persichitte said.

Other investment accounts, including IRAs, 529s and other custodial accounts, also allow higher contribution limits, which could help you save a larger amount over the long term.

However, as Ayers and Clayborne said, you don't necessarily have to choose between Trump Accounts and pre-existing investment vehicles for kids like Roth IRAs and 529 accounts. In fact, pairing Trump Accounts with other types of investment accounts could be a good way to diversify your family's overall investment portfolio, given that other types of accounts have wider investment selections than Trump accounts do.