One of the most common questions we’re hearing from parents and grandparents lately is whether they should open one of the new Trump Accounts for their children or grandchildren.
Yet, as it often happens with new government-sponsored savings programs, the answer isn’t entirely straightforward. Each new account type comes with its own set of rules, restrictions, and tax considerations. Trump Accounts are available for children under age 18 who have a valid Social Security number. However, the most attractive benefit is the government’s $1,000 contribution for children born between 2025 and 2028.
Given that benefit, the answer is relatively simple for families welcoming a child during this period: yes, open the account. For everyone else, the decision requires a closer look.
Why the Opportunity Makes Sense for Newborns
When a Trump Account is opened for a child born between 2025 and 2028, the federal government contributes $1,000 to get the account started. My view is that there is little reason to decline what is essentially free money that can provide a financial head start. In addition, investments within the account grow tax-deferred for federal tax purposes, meaning taxes are generally not owed until funds are withdrawn.
Assuming a hypothetical 10% annual return, roughly in line with the long-term historical return of the U.S. stock market, the government’s $1,000 contribution could grow to more than $5,500 by age 18.[1]
At age 18, the child gains control of the account. If the funds are used for higher education, the account can help cover those expenses while being taxed at the student’s typically lower tax rate. Additional qualified uses include a first-time home purchase and certain other approved expenses. If the funds are used for non-qualified purposes, the withdrawals are generally subject to ordinary income tax plus a 10% penalty.
Ways to Keep the Trump Account Growing
While many 18-year-olds may not think strategically about preserving long-term wealth, most parents and grandparents do. For families 
focused on maximizing the benefit of the account, there are several ways to extend its value beyond age 18.
If college costs are already covered through other savings, scholarships, or financial aid, the account can continue growing for future use. One potentially compelling strategy is converting the account to a Roth IRA. By paying the applicable income tax on the converted amount, future growth can occur tax-free within the Roth IRA.
Families should be mindful of the “kiddie tax” rules, which were designed to prevent parents from shifting investment income to children in lower tax brackets. If a conversion occurs before the child reaches age 24, part of the income may be taxed at the parent’s rate rather than the child’s. The timing of any Roth conversion should therefore be carefully evaluated.
Should You Make Additional Contributions?
While accepting the government’s initial $1,000 contribution is an easy decision for most families with newborns between 2025 and 2028, deciding whether to make ongoing contributions requires a more careful analysis.
For starters, some states currently do not conform to the federal tax treatment of Trump Accounts. States including Massachusetts, Pennsylvania, and California are among those currently treating earnings as taxable at the state level rather than allowing tax-deferred growth. While these rules could change over time, they currently reduce some of the account’s tax advantages.
In addition, distributions are generally subject to federal income tax, even when used for qualified purposes. If funds are used for non-qualified purposes, the 10% penalty also applies. As a result, other account types may offer greater tax efficiency depending on a family’s goals.
When Additional Contributions to a Trump Account May Make Sense
Trump Accounts can receive up to $5,000 per year in contributions from family members or other individuals. Employers can also contribute up to $2,500 annually for employees with children.
The rules further allow contributions by individuals, businesses, or charities on behalf of a class of beneficiaries. One notable example is philanthropist Michael Dell and his wife, who donated $250 to children living in certain lower-income ZIP codes.
If a child is eligible for employer or charitable contributions, opening the account to receive those funds is generally a worthwhile decision.
Other Savings Vehicles to Consider
Beyond accepting the initial $1,000 government contribution and any available employer or charitable funding, families should compare Trump Accounts to other established savings vehicles.
529 Plans
For families who expect their children to attend college, a 529 Plan is often the more attractive option. Contributions grow tax-deferred and qualified withdrawals are entirely tax-free. By comparison, Trump Account distributions are generally taxable even when used for education expenses.
UTMA Accounts
Parents who want to save for a child without limiting the funds to educational purposes may prefer a Uniform Transfers to Minors Act (UTMA) account.
A UTMA allows the parent or custodian to maintain control of the assets until the child reaches the age of majority, which is age 21 in many states. Trump Accounts transfer control at age 18.
UTMAs also offer greater flexibility. The assets can generally be invested in a broader range of securities and can be accessed at any time for the child’s benefit. The tradeoff is that investment income is taxable each year and may be subject to the kiddie tax, which can cause some of a child’s investment income to be taxed at the parent’s higher tax rate once certain thresholds are exceeded.
A Potential Legacy Planning Tool
For high-income families, Trump Accounts may serve another purpose: intergenerational wealth transfer.
By making annual contributions over many years and then converting the account to a Roth IRA after the child reaches age 24, families potentially may be able to create a significant pool of tax-free retirement assets for the next generation. In the right circumstances, this can be a highly effective legacy-planning strategy.
The Bottom Line
The Trump Account is a valuable opportunity for children born between 2025 and 2028, particularly because of the government’s initial $1,000 contribution. Families should strongly consider opening an account to capture the government’s contribution as well as any 
available employer or charitable funding. Whether additional contributions make sense depends on the family’s goals, tax situation, state of residence, and available alternatives such as 529 Plans or UTMA accounts.
With so many account types and planning considerations available today, consulting a CERTIFIED FINANCIAL PLANNER® professional can help families determine the most effective strategy.
Regardless of which account is chosen, the larger lesson remains the same: encouraging children to save and invest from a young age can have a profound impact on their future financial independence. Investing early is one of the greatest financial gifts a parent or grandparent can provide.
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[1] This is a hypothetical illustration only. Assuming a 10% annual return for illustrative purposes, a $1,000 contribution could grow to more than $5,500 by age 18, but actual results will vary and returns are not guaranteed. This example does not reflect fees, taxes, or changing market conditions.
