Who Would Benefit the Most From Trump’s $1K Baby Savings Accounts?
Written by
Sean Bryant
Edited by
Jenna Klaverweiden
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Now that President Donald Trump’s “Big Beautiful Bill” has been signed into law, many families with newborns can expect to receive $1,000 to invest in their child’s future. Referred to as “Trump Accounts,” they’re designed to encourage families to begin investing in a child’s future from birth and enjoy the benefits of compound interest.
But is everyone really going to benefit from this plan? Let’s explore the details of these Trump Accounts and who they could be most useful for.
Who Is Eligible for the $1K?
With these accounts, every child born a U.S. citizen with a Social Security number between Jan. 1, 2025, and Dec. 31, 2028, will receive a $1,000 deposit from the U.S. government into the account.
How Will Trump Accounts Work?
Setting up your newborn for a Trump Account can be done in a couple of different ways. Parents or guardians can open the account in their child’s name. If not, the Treasury Department could open it, per Kiplinger. Once the account is open, $1,000 will be deposited for those who qualify.
There are some restrictions on these accounts that parents should be aware of.
- There will be a $5,000 yearly contribution limit for each year before the child turns 18.
- No distributions are allowed until the first day of the year when the child turns 18.
- After the child turns 18, the account will follow traditional IRA rules.
- All contributions made to the account before the child’s 18th year will be made with after-tax dollars. This means parents will not be able to deduct their contributions from their taxes.
- Accounts can be used for college expenses, to start a business or to purchase a home.
Who Would Benefit From Trump Accounts?
Who would benefit from these Trump Accounts will be something that’s heavily debated.
“The $1,000 baby savings account is a simple but powerful idea,” said Tim Rosenberger, fellow at the Manhattan Institute. “It gives every American child, not just those born into privilege, a small but meaningful stake in the nation’s future. That’s the kind of ownership society that puts America first.”
According to Rosenberg, this could benefit working families. “A universal savings account at birth offers a new kind of opportunity infrastructure. It won’t solve every problem, but it’s a strong first signal that the country is serious about helping working families build intergenerational stability,” he said.
While these accounts may be a good first step, however, they may not always provide the best option for saving for a child’s future.
“Everyone eligible for the $1,000 should make sure they get it, but that alone is not enough to set aside for your kids’ education or set them up for generational wealth,” said Dave Fortin, co-founder and investment advisor with FutureMoney. “529 plans are a better option than Trump accounts if you’re saving for education. When you make a qualified withdrawal from a 529 plan, it’s tax-free and penalty-free. Trump accounts are tax-deferred, meaning when the withdrawal eventually happens, the money counts as ordinary income, so income taxes are owed.”
Ultimately, while all eligible families should take advantage of the free money being offered, it’s important to consider the long-term implications. Before making additional contributions, make sure the account aligns with your child’s savings goals.
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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