CHICAGO (WLS) — President Donald Trump is promoting a new savings program for children called Trump Accounts, which became available July 4 and offers government-funded seed money for some eligible participants.
The tax-deferred accounts are invested in low-cost index funds and are available to people under 18. Trump highlighted the program during the New York Stock Exchange opening bell, which was conducted from the White House.
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Financial advisors, however, say families should carefully consider whether the accounts align with their long-term goals.
“It does become the child’s property when they turn 18, so you may be intending that this is going to be used for college or for a home purchase. They may think it’s a great way to go to a World Cup game,” said Ann Garcia, a wealth advisor with The Mather Group.
According to information provided about the program, children born between 2025 and 2028 receive a $1,000 seed payment from the federal government. The first 25 million children up to age 10 who live in ZIP codes with median annual incomes below $150,000 also qualify for an additional $250 funded through private donations.
Garcia said families who qualify for the government-funded contributions should consider taking advantage of them.
“My personal opinion is if you’re eligible for free money, take it,” Garcia said.
Still, Garcia said families who do not qualify for the additional funding have other options for saving for their children. She cited Illinois’ 529 college savings plans as one alternative, noting that withdrawals from a 529 account are not taxed in Illinois, while withdrawals from a Trump Account are taxed.
“If you take $10,000 out of a 529 you have $10,000. If you take $10,000 out of a Trump account, you might have $7,500,” Garcia said.
Trump Accounts also differ from 529 plans in other ways. Contributions are capped at $5,000 per year, and investments are limited to low-cost U.S. stock index funds managed by Bank of New York Mellon and Robinhood.
U.S. Rep. Sean Casten, D-Ill., criticized Robinhood’s involvement, saying the company has previously faced settlements related to its treatment of customers.
“You are going to have very young kids receiving this account and being potentially encouraged to buy and sell things by a company that really has a bad track record of looking out for all investors,” Casten said.
Parents can open an account by filing an IRS form online at TrumpAccounts.gov. Financial advisors recommend consulting a financial professional before deciding whether the accounts are the right fit for a family’s savings strategy.
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