Trump Accounts for Kids Will Offer $1,000 in Free Seed Money—Here’s What We Know So Far

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Here’s How the New Trump Accounts for Kids Work

The “Trump Accounts” introduced in the “One Big, Beautiful Bill” are government-funded investment accounts designed to help children build wealth from birth. Children born between January 1, 2025, and December 31, 2028, who are U.S. citizens and have a Social Security number, will be eligible to receive a one-time $1,000 deposit from the U.S. Treasury.

Children born outside these three calendar years are also eligible for a Trump Account, but they will not receive the $1,000 in seed money from the government.

In both cases, parents can contribute up to $5,000 per year to each account. The law also allows employers to make contributions for their employees’ dependents, up to $2,500 per year. However, any employer contributions count toward the overall $5,000 cap.

Withdrawals from a Trump Account will not be allowed until the beneficiary turns 18. After that, the account will function similarly to a Traditional IRA, with tax-free growth and the ability to withdraw funds for any purpose starting at age 59-1/2. However, early withdrawals will be permitted penalty-free for some expenses, such as qualified educational costs, up to $10,000 for a first-time home purchase, or to start a business.

As of this writing, these accounts are not yet available. In addition, the IRS and regulatory guidance have yet to clarify the final rules on how withdrawals will be taxed. Some sources suggest only the gains—not the initial contribution—will be taxed as regular income, while others propose they will be taxed as capital gains.

Official guidance from the White House and the IRS will be necessary to finalize these details. But in the meantime, we know who these accounts are best suited for—and who can ignore them.

Who These Accounts Are Good For—And Who Should Take a Pass

For anyone with a baby born between 2025 and 2028, a Trump Account will be a no-brainer. There’s no reason to pass on the free $1,000 in seed money the government will contribute to your child’s account. The bill mandates that the Treasury will automatically open an account for any eligible child who doesn’t already have one.

While there are some investment limitations and the tax treatment may turn out to be less favorable than other options, these concerns are secondary to the $1,000 seed money contributed by the Treasury. Letting this initial amount grow over time will provide a modest, but solid, nest egg your child can access down the road—all at no cost to you.

Opening a Trump Account will also make sense if your employer is willing to contribute to your child’s account, permitted for up to $2,500 per year. Since the legislation is new, it’s unclear how many companies will offer this perk. But it’s worth opening an account if you find your minor child—born in any year—qualifies for an employer contribution.

For children born outside the years eligible to receive seed money (or without an employer contribution), a Trump Account won’t be your best option. But you still have choices. For college savings, a 529 account offers better tax-free treatment and greater investment choices. A Roth IRA is significantly more favorable for any child with earned income, such as money from a summer job. Parents should also consider opening a custodial brokerage account, which provides more flexibility and potentially more favorable tax treatment.