Trump Accounts: A New Way to Jumpstart Your Child’s Savings
 

Imagine your child getting a head start on their financial future before they even know what a budget is. That’s the idea behind Trump accounts - a brand-new savings tool created by the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025.

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Think of it like planting a tree: the earlier you put it in the ground, the more time it has to grow. These accounts work much the same way - only with rules you’ll want to understand before diving in.

 

A $1,000 “Welcome to the World” Gift

 

If your child is born between January 1, 2025, and December 31, 2028, the federal government will deposit $1,000 into a Trump account for them. It’s a one-time gift, no application required.

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How to Add More Before Age 18

 

Parents, grandparents, relatives, and even family friends can contribute any year before the child’s 18th year—even if the child didn’t qualify for that $1,000 starter.
 

 

Here’s how it works in plain terms:
 

 

• You can put in up to $5,000 a year (inflation adjustments start in 2028).

• It’s after-tax money—you don’t get a deduction.

• The child doesn’t need a job or income to get a contribution.

• Money stays locked until the year they turn 18.

• After that, withdrawals work like a traditional IRA: contributions are tax-free, but earnings are taxed and might have a 10% early withdrawal penalty unless there’s an exception.

• Funds can stay invested and grow tax-deferred until normal IRA required minimum distribution (RMD) age.

• Until age 18, investments must be in a low-cost S&P 500 index fund or something similar.
   

Example: If you contribute $5,000 every year from birth until 18 and the account grows at 7% annually, your child could have over $170,000 by adulthood - without ever touching the money. Until 18, investments have to be in a low-cost S&P 500 index fund or something similar.
 

 

After They Turn 18
 

 

Once the child reaches their age-18 year, the account follows traditional IRA rules:
 

 

• Annual contribution limit is $7,000 in 2025 ($8,000 if age 50+).

• They must have earned income to contribute.

• Roth contributions aren’t allowed, but earlier contributions can potentially be converted to a Roth.

• Deductibility depends on income and whether they have a workplace retirement plan.

• Withdrawals are taxed, and early withdrawals may face a penalty.

• Investments can be broader (same limits as IRAs—no collectibles, life insurance, or S-corp stock).
   

   

Employers and Others Can Chip In, Too

 

Employers can contribute up to $2,500 a year for teen workers or their dependents (indexed starting in 2028). The law also allows federal or state governments and certain nonprofits to make contributions for eligible kids under 18.
 

 

 

When Can You Open One?

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Trump accounts are expected to roll out in 2026. Between now and then, expect more guidance on exactly how the program will be administered.

 

These accounts won’t be right for every family, but for those looking to give kids a serious long-term advantage, they could be a powerful tool. The earlier you start, the more that little “sapling” of an account can grow into a strong financial tree.