The new “Trump Accounts (“TAs”),” launching July 4, 2026, arrive wrapped in the kind of political branding that practically guarantees half the country will cheer before reading the fine print and the other half will boo.

Both reactions miss the point.  The better question is whether these accounts help children build wealth, and at what cost.

TAs were created as a new form of a traditional IRA for children—opened and directed by an “authorized individual”—generally a legal guardian or parent.  Any child who is under 18 and has a valid SSN can have a TA–one TA per child.

Importantly, the Treasury will provide a one-time $1,000 seed contribution for U.S. citizens born between January 1, 2025 and December 31, 2028, but the money is not automatic.  An authorized individual must open the account and elect the contribution, currently through IRS Form 4547.  Parents, grandparents, friends and even employers can contribute a combined total of $5,000 per year until the year the child reaches 18.  Additionally, until 18 the money must be invested in a diversified U.S. stock index fund with minimized fees and expenses.

Generally, no withdrawals can be made before 18; once the child takes control, distributions are taxed like those from a traditional IRA (ordinary income on pre-tax amounts, plus 10% penalty before age 59 ½, with certain exceptions).

“Making American newborns tiny capitalists” is an attractive sound bite, but the devil is in the details.

As I’ve often said, time in the market is much more important than timing the market.  Time is the most powerful force in investing and children have more of it than anyone.  Albert Einstein famously referred to compound interest as the “8^th Wonder of the World.”  The accompanying “Rule of 72” says that dividing 72 by your rate of return gives you the number of years to double your investment.

Assuming an 8% return, your investment doubles every 9 years (72/8 = 9).  A $1,000 contribution at birth grows to $2,000 by age 9, $4,000 by 18 and $128,000 by 63.  That won’t solve the retirement crisis by itself—roughly a fifth of Americans over 50 have nothing saved for retirement–but compounding is one of the few financial concepts that actually deserves its reputation.

Real wealth building lives in the $5,000 annual contribution ceiling.  Assume a child born this year has a TA opened and the account receives the one-time $1,000 deposit from the government plus the maximum $5,000 annual contribution at the beginning of each year until the year the child turns 18.

Under this scenario, if the account earns 8% annually, it would grow to about $206,000 by the time the child turns 18.  If left untouched–no withdrawals or additions—it could grow to about $6.6 million by age 63. 

No magic.  Just time, patience and the “miracle” of compound interest.

The second benefit is behavioral. Giving every eligible child an account may make investing feel less mysterious.  A child with a TA has a built-in teaching tool.  Parents can explain risk, patience, bull and bear markets and why the evening news is usually a terrible investment adviser.

Financial literacy classes are fine, but real accounts make the lesson tangible.  A child who receives quarterly statements and watches an account balance rise and fall over time may learn earlier than many adults that volatility is not the same as loss and that wealth is usually built slowly, not discovered in a hot stock tip.

There are already many ways to save for your child’s future, depending on individual circumstances, goals and liquidity needs.  Some of the most popular are 529 plans, Roth IRAs (for children with earned income), Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) accounts and parental savings transferred via gift or inheritance, all of which have different rules for contributions, withdrawals and taxation.

TAs can be better or worse, depending on circumstance.  For instance, 529 college savings plans are superior for education because withdrawals are tax-free when used for qualified expenses.  TAs also favor families with the resources to contribute the full $5,000 annually, a feature critics argue could widen the wealth gap the program aims to shrink, even though the $1,000 government contribution alone benefits lower-income families.  

Look past the branding.  View TAs as a sensible, low-cost on-ramp to lifelong investing and an additional financial tool, not a replacement, even if the child was born before 2025 and ineligible for the $1,000 government deposit.  To get started, the “authorized individual” files IRS Form 4547 at https://trumpaccounts.gov/form.  The Bank of New York Mellon (BNY) serves as Treasury’s financial agent for the program, with Robinhood as the initial trustee.

Teach your kids about the power of compounding and why they should resist the temptation to cash in the account when they become the owner at 18.

If you have a child born between January 1, 2025 and December 31, 2028 and don’t open an account, understand you’re leaving a $1,000 bill–and possibly $128,000 or more in future value–lying on the sidewalk.

The opinions expressed in these articles are those of the author as of the date the article was published. These opinions have not been updated or supplemented and may not reflect the author’s views today. The information provided in these articles are not intended to be a forecast of future events, a guarantee of future results and do not provide information reasonably sufficient upon which to base an investment decision and should not be considered a recommendation to purchase or sell any particular stock or other investment.