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Americans have a new way to invest in their kids' futures: Trump Accounts launched over the weekend. Congress approved them last year as part of the One Big Beautiful Bill Act, Republicans' tax and spending law. They function similarly to retirement accounts, but instead of being for adults preparing for their senior years, they're for assisting kids with the start of their adult lives.
The money in these accounts will be invested in an index fund that broadly tracks the stock market. Any American citizen under age 18 can have an account, and once they turn 18, they can access that money for things like education or buying a house. (The money can also be used for other purchases, but that comes with a tax penalty.)
The accounts function as a kind of digital "donation bucket" that many people can contribute to — kids' families, but also philanthropists, their parents' employers, and even the government. Contributions from family and other adults in the children's lives are made in after-tax dollars; contributions from others, such as employers or the government, are pre-tax. The child will only pay tax on the investment's growth once they withdraw the funding.
But there are already plenty of other options for parents to invest in, from education saving plans to their own retirement accounts. So should you sign up your family for Trump accounts? Here are four things to consider.
Your child could get free money from the federal government
If you have a child born between 2025 and the end of 2028, financial advisors say signing up for a Trump Account should be a simple decision for one reason: The child's account will automatically get a $1,000 seed contribution from the federal government.
Financial planner Michael Reynolds with Indiana's Elevation Financial did the math for Morning Edition and said that, even without any additional investments, that $1,000 would become almost $4,000 by the time a kid turns 18. (That's assuming an 8% rate of return and doesn't count the income tax that has to be paid on the growth and initial federal contribution.)
Your kid might be eligible for other donations
Kids born before that window are not completely out of luck. Millions of them under age 11 will still get $250. That comes from more than $6.25 billion donated by Michael and Susan Dell of Dell Technologies.
That money will only go to children who don't qualify for the federal contribution. To qualify, their families must also live in zip codes where the median family income is under $150,000.
And if your children don't qualify for the Dell donation, there are other options that could come your way.
Some companies are also offering contributions, like the memory chip maker Micron. It's giving $250 to up to a million children living near some of its worksites in states like Minnesota, California and New York, as a way to support the local workforce and community. Micron will also match employee donations to their own children's accounts, up to $1,000 per kid.
Other companies, including Mastercard, Uber and Visa, are also offering matches to employees.
That includes some small businesses, too. "We're going to try it out," said Luke Delorme, co-owner and director of financial planning at the finance firm Tableaux Wealth. "Maybe it'll fit into their financial picture in the future in some meaningful way."
Consider your own retirement funding first
Parents should also prioritize their own retirement before putting money away for their kids' retirement, said Carrie Joy Grimes, CEO of the nonprofit personal finance company WorkMoney.
She suggests parents max out their own retirement accounts before other options, "because what happens is we put money into our kids' stuff, and then we end up needing help in retirement — and that is a way worse financial stress on our kids."
Your kids may also benefit from a 529 education plan
Parents can already choose to invest for their children's futures through 529 savings plans. As with Trump accounts, family members can contribute to these plans with post-tax dollars.But there are differences. First, 529 plans allow kids to withdraw the money tax-free. And second, that money can only be used for education.
Parents can opt for both. Financial advisors say how families can benefit from Trump Accounts will depend on their financial situation. For wealthier families with parents who can already afford to max out their retirement accounts and put aside money in a 529, Trump Accounts are essentially an extra tax benefit for their kids.
Ray Boshara, a senior policy advisor at the Aspen Institute, says that lower-income families will primarily benefit from having that digital donation bucket that can accrue contributions for their kids. Those children might be able to start their adult lives with thousands of dollars they otherwise wouldn't have had.
"These accounts will be transformative for them," Boshara says.
Note: Dell Technologies is a financial supporter of NPR.
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