By Justine Wang ANALYSIS — President Donald Trump has repeatedly said that so-called Trump accounts, new federal investment and savings accounts for children, “could grow to hundreds of thousands of dollars” by the time children turn 18. That’s only true if parents or other donors contribute thousands of dollars per year, per child, assuming that future returns are close to the historic stock market averages. While touting the program, Trump has also repeatedly suggested that children from homes with “essentially no money” could become “very rich” with the Trump accounts. But financial experts say it’s unlikely that parents in low-income households would be able to afford to contribute enough for their children’s accounts to reach hundreds of thousands of dollars by the time they reach adulthood. “Think of it, children that are born without money, without any money. Great parents, they can have — everything can be great, but they have no money. They can become very wealthy children at 18,” Trump said on July 6. Parents, relatives, friends, employers, state governments, philanthropic organizations and individuals can contribute to these accounts until a child turns 18, up to a total $5,000 annual combined limit per account. Not everyone has embraced the program; Democratic Rep. Bennie Thompson of Mississippi posted on X on July 6, “It’s safe to say, I would pass on a Trump account.” Thompson said, “Trump University already taught us what happens when his name is on the brochure.” But experts say those who eschew the accounts for their children could be leaving free money on the table. As part of the One Big Beautiful Bill Act, which Trump signed into law on July 4, 2025, the federal government will seed new accounts with $1,000 for children born between Jan. 1, 2025, and Dec. 31, 2028, who have a valid Social Security number. (Parents can open accounts for older children, but they won’t get the $1,000.) In addition, the first 25 million children under the age of 10 and residing in a ZIP code with a median income of $150,000 or less will receive an additional $250, which was funded by Michael and Susan Dell’s donation of $6.25 billion to these investment accounts. Even if donors don’t contribute anything, that seed money could grow to several thousand dollars by the time a child reaches adulthood. What are Trump accounts? The Trump accounts are a new child savings account that a parent can open for any child before the age of 18. As of July 6, Trump said that “6 million American children have signed up,” and out of those, 1.4 million met the birth date requirement that makes them eligible for the $1,000 in government seed money. As of July 4, the Treasury had already deposited the $1,000 into over 500,000 accounts. As we said, parents and relatives, employers, charities, and others can also contribute, up to the per-account $5,000 yearly maximum. The Treasury Department said on July 1 that the Trump accounts will all be initially invested in State Street SPDR Portfolio S&P 500 ETF, which is a low-cost index fund that tracks the performance of the 500 largest publicly traded companies in the U.S., and that other stock index fund options will be available in the “coming months.” The accounts will be managed by parents and will grow tax-deferred until the child turns 18 years old, when the account is then treated like a traditional individual retirement account. The money can’t be withdrawn before a child reaches adulthood. Once a child has turned 18, just as with a traditional IRA, withdrawals can be made penalty-free for certain qualified expenses, such as college tuition and for first-time home purchases (up to $10,000). If an exception doesn’t apply, there’s a 10 percent tax for making withdrawals before age 59 1/2. Withdrawals, including any pre-tax contributions such as the government seed money or employer contributions, are also taxed at ordinary income tax rates, as the Tax Foundation explains. After-tax contributions are exempt from those taxes. The $1,000 contributions will cost the government $17 billion through 2028, according to the Committee for a Responsible Federal Budget. Trump’s claim of investment growth When promoting the program, Trump has often claimed that these accounts “could grow to hundreds of thousands of dollars by the time they [children] reach 18 or 21.” To grow to such levels, though, parents or others would have to make significant annual contributions to a child’s account. A White House Council of Economic Advisers report estimates — based on its midrange scenario, which assumes an average annual return of 10.3 percent and the government’s $1,000 in seed money — that a Trump account would grow to $303,757 by the time a child turns 18 if supplemented by the maximum $5,000 annual contribution (adjusted for inflation starting next year). The CEA also provides a high-range scenario — which assumes an average annual 18.5 percent return — in which the account would grow to $730,395 by the time the child turns 18. CEA’s low-end scenario — which assumes average annual stock growth of 5.4 percent — projects an account balance of $187,408 in 18 years. Growth estimates without such generous annual contributions would, of course, result in much lower returns. Accounts supplemented by annual contributions of $2,500 per child (adjusted for inflation starting next year) would grow to $154,798 when a child turns 18, according to CEA’s mid-range scenario. And with no contributions, the $1,000 seed money would grow to $5,839. For context, the State Street ETF chosen for the initial accounts has averaged an annual return of 11.31 percent since it was launched in late 2005. Joseph Rosenberg, a senior fellow at the Urban-Brookings Tax Policy Center, told us in an interview that “it is possible” for someone who contributes the maximum to a Trump account to have a balance of hundreds of thousands. He said that “a newborn who gets the $1,000 and then their parents contribute $5,000 every year until they’re 18. You know, if you assume a 7 percent rate of return, that does get to about $200,000 by the time they’re, say, 18.” He estimated the balance of an account with no additional parent contributions to be a little more than $3,000 when the child is 18. All of those values, he noted, are before taxes and adjustments for the effects of inflation. They are also all highly dependent on the performance of the stock market, he said, so the returns may be less than estimated if the stock market doesn’t do as well. Trump’s claim of poor children becoming rich The government website about the accounts —trumpaccounts.gov — makes it clear that donors or families would need to contribute the maximum yearly amount to likely grow an account balance to more than $200,000 once a child is 18. But in publicly discussing the accounts, Trump has frequently framed them as an opportunity for children from low-income homes to become rich. “It’s really an amazing thing because it gives young children that start out with really nothing and it gives them — boy, it’s more money than anybody could imagine,” Trump said in remarks about the program on Jan. 28. “It’s a beautiful thing. It’s a child has had no money, and when that baby becomes a man or a woman, they can have hundreds of thousands of dollars, maybe more, but they can have hundreds of thousands of dollars, because we’re seeding it,” Trump said in a CNBC interview on July 2. “Children can, at the age of 18 and after, become very wealthy people; come into the world with essentially no money and end up a very young age being very rich,” Trump said at a Trump account launch event on July 6. “Think of it, children that are born without money, without any money. Great parents, they can have — everything can be great, but they have no money. They can become very wealthy children at 18.” But financial experts say it’s unlikely low-income families could afford or would make those kinds of thousands of dollars in annual contributions for each of their children. Trumpaccounts.gov estimates that if no additional contributions are made beyond the initial $1,000 seed money, that account could be worth $243,000 by the time the child is 55 years old. Michelle Singletary, a personal finance columnist for The Washington Post, wrote on July 11 that many low-income families would lack the disposable income needed for these accounts to grow significantly by age 18. “If you’re a family living paycheck to paycheck, finding an extra $400 a month to lock away is a fantasy. The issue has never been a lack of account types. The obstacle for many families is a lack of surplus cash,” she said. “By relying on families to invest up to $5,000 annually to see meaningful growth, Trump accounts do not solve the fundamental problem of poverty.” According to an analysis by the Urban Institute, “Without additional deposits into the accounts of kids from families with low incomes, children of wealthy parents will primarily benefit” from the program. In a blog post for The Tax Law Center at New York University, Greg Leiserson, a former senior economist for the White House Council of Economic Advisers under Presidents Barack Obama and Joe Biden, also warned the program may exclude vulnerable children who have “unstable or complex living situations” as well as “those whose caregivers have very low incomes and do not file a tax return.” Furthermore, some experts argue that the Trump accounts are not as tax-efficient as other investment accounts for many families. Adam N. Michel, the Cato Institute’s director of tax policy studies, wrote an analysis that found the Trump accounts would yield the lowest after-tax value of savings compared with other types of accounts, such as a health savings account or a traditional or Roth IRA. “The most attractive feature of a Trump Account is not its treatment of personal contributions but the ability to receive transfers from governments, employers, and nonprofit organizations,” Michel wrote. “These contributions represent direct government subsidies or tax-free contributions from employers or nonprofit organizations. In that context, the accounts function less as a neutrality-enhancing investment vehicle and more as a welfare program. Any financial advantage of the accounts therefore derives primarily from the presence of these external contributions rather than from improved tax treatment of the contributions made by the beneficiary’s family or friends.” In a press release, the Trump administration stated that more than 50 companies so far have committed to making Trump account contributions for their employees’ kids. Employers can make tax-free contributions of up to $2,500 a year to employee accounts. That amount counts toward the $5,000 annual maximum contribution.
