When the One Big Beautiful Bill was signed into law on July 4, it created a new account for children. The so-called “Trump account” provides a one-time $1,000 deposit from the government at birth and gives parents and relatives the chance to make additional contributions each year.
The Treasury Department has now claimed that the accounts could grow to $1.9 million over 28 years — although to reach that goal, parents would need to invest quite a bit of additional money, beyond that initial $1,000 seed contribution.
Here’s what you need to know about these accounts, how they work, how much they could grow and how they compare to other popular investment options parents can leverage for their children.
The One Big Beautiful Bill allows parents to open Trump accounts at any bank of their choosing for children born after December 31, 2024 and before January 1, 2029 and the government will provide the initial $1,000 investment. However, the child must be a U.S. citizen with a Social Security number.
Of course, parents can still open Trump accounts for children born at other times, but anyone born outside this period won’t qualify for the $1,000 seed money.
The money can then be put into an eligible investment such as a mutual fund or ETF that tracks a financial index like the S&P 500. The investment can’t have fees or expenses above 0.1% and it must include equity investments primarily consisting of U.S. companies.
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Parents are allowed to contribute up to $5,000 per year to these accounts, while their employers are allowed to invest up to $2,500 (just note that the $2,500 employer contribution counts towards the $5,000 annual limit). This amount is adjusted for inflation. While employer contributions are not taxed, parent contributions aren’t tax-deductible.
The invested funds will grow tax-free until the money is withdrawn, with children having the option to take out the money once they reach the age of 18. At that time, a withdrawal triggers a tax event and is treated like an IRA for tax purposes.