What the new US “Trump Accounts” can teach us all about saving for our children

President Trump tucked a potentially brilliant new savings scheme for children into the One Big Beautiful Bill.

Dubbed “Trump Accounts”, the savings initiative could make a significant difference to a child’s future financial security.

The government will pay $1,000 into an investment account for every baby born in the US between 1 January 2025 and 31 December 2028.

Parents and families can also contribute up to $5,000 each year to the child’s account. And even employers can get in on the act.

Although contributions to a Trump Account could come from several sources, there are strict rules on how much can be contributed each year and when distributions can be made.

5 key things to know about Trump Savings Accounts

1. The child is the owner of the savings account throughout – and is referred to as the beneficiary.

2. Parents, guardians, and other individuals can contribute up to $5,000 into a Trump account. While employers can contribute up to $2,500 for an employee or the employee’s dependent who is under 18. The employer’s contribution also counts towards the $5,000 yearly limit.

3. Parents or guardians can claim the initial $1,000 government contribution by filing an election with the IRS. The child must have a Social Security number. And the $1,000 deposit doesn’t count against that year’s $5,000 limit.

4. Tax treatment of both contributions and withdrawals is complicated. While contributions from parents, guardians, and other individuals aren’t tax-deductible, instead the tax benefits accrue to the child as these funds can be withdrawn tax-free. However, employer contributions, the $1,000 federal contribution, and charitable gifts are taxable when withdrawn.

5. When the child turns 18, the account will automatically become a traditional IRA, following the usual IRA contribution rules.

This is only a quick snapshot of the rules and tax treatment of Trump Accounts. To find out more and understand how your child may benefit, please get in touch.

Potential returns a child could gain from a Trump Account

According to estimates from the Council of Economic Advisers (CEA), the table below shows the potential Trump Account balance for a baby born in 2026, based on average US stock market returns:

These figures highlight the power of starting early – even a single $1,000 deposit could grow substantially over time.

However, making regular contributions dramatically increases the potential balance, giving a child far greater financial security and flexibility as they enter adulthood.

Typically, a child will be able to access funds held in their Trump Account in the year they turn 18.

They could use the money to help cover the costs of further education or buying a home. Alternatively, they may choose to leave the funds untouched, allowing the funds to roll into an IRA and continue to grow as they begin their careers.

Invest for babies and young children and you’re already winning

Regardless of where you live, investing on behalf of your children could gift them a strong financial start by the time they enter adulthood.  

Thanks to the effects of compounding, the sooner you start, the longer the money will be invested and the more your infant will benefit in later life.

However the money is spent in the future, taking advantage of the first 18 years of a child’s life will put them in a powerful position to generate more wealth. And it could make a significant difference to their life choices once they complete their high school education.

Pause and think about how and where to invest

Before you rush into putting money away for the children in your life, make sure you consider your own financial situation first.

Ask yourself these crucial questions:

• How much can you afford to save for others after your own needs have been met?

• Where and how do you want to save the money you put away?

• How much risk are you prepared to take in pursuit of better returns?

•  What costs are involved in setting up, managing and accessing the investment?

There are many different ways to invest for children, and options will vary depending on your location and circumstances.

For example, you might prefer property to shares, or valuables like art or even wine.

Naturally, you want an asset that will appreciate in value until your grandchild is ready to use the wealth. So, it’s important to research the type of asset you want to invest in before you make any moves.

Holding wealth in a trust may also be useful, as it allows you to designate cash or assets for your child or grandchild while retaining some control over how and when beneficiaries can access them.

If in doubt, get in touch and we’ll help you to understand what type of investment might work best for you and your family.

Get in touch

If you want to invest on behalf of the children in your life and would like to discuss all the available options or the type of fund which might be suitable, we’re here to help.

Email enquiries@alexanderpeter.com or give us a call on +44 1689 493455.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

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