Trump accounts: How the new savings program for kids works

President Donald Trump highlighted “Trump accounts” during his State of the Union address on Tuesday, describing them as tax-free investment accounts available for every American child.

Under a lesser-known provision of Trump’s tax legislation enacted last year, these accounts provide $1,000 for each newborn, provided the child’s parents set one up.

“This is something that’s so special, it has taken off and gone through the roof,” Trump said during his remarks Tuesday night.

The Trump Account is a new savings program where money is invested in the stock market on behalf of a child. The funds are managed by private banks and brokerages and can only be accessed when the child turns 18. The money is intended for specific purposes, such as paying for college, starting a business, or buying a home.

Accounts are invested in U.S. equity index funds with annual fees capped at 0.10%.

Once a parent opens an account, the U.S. Treasury will contribute $1,000 for newborns born during the Trump administration from January 1, 2025, to December 31, 2028. Children must be U.S. citizens with a Social Security number to qualify, though a parent’s immigration status does not matter.

Parents can contribute up to $2,500 per year in pretax income, similar to retirement accounts. Contributions from relatives, friends, employers, local governments, and philanthropic organizations are allowed, though annual contributions are capped at $5,000 (government and charity contributions do not count toward this cap).

For older children born before 2025, the $1,000 Treasury bonus is not available, but parents can still open accounts and contribute up to $2,500 annually. Additionally, thanks to a donation from billionaires Michael and Susan Dell, children 10 and under in ZIP codes with a median family income of $150,000 or less can receive $250 in seed money if an account is opened.

Supporters say the program encourages wealth-building for children, particularly from low-income households, and promotes capitalism at a time when socialist candidates are gaining popularity.