The recent launch of "Trump Accounts," a government-backed investment program for children, has been met with skepticism from some parents who fear it may be a scam or have ulterior motives. The program, which offers a $1,000 seed deposit for eligible children born between 2025 and 2028, has drawn comparisons to former President Donald Trump's past business ventures.
Concerns voiced by parents include a general distrust of financial programs bearing Trump's name, with one parent stating, "The amount of grift from this administration is off the charts." Another echoed this sentiment, questioning the outcome of past deals associated with Trump. Mississippi Rep. Bennie Thompson (D) also dismissed the program, drawing parallels to the failed "Trump University" and its significant settlement.
"Trump University already taught us what happens when his name is on the brochure," Thompson stated on social media. His office later clarified that his point was about advocating for federal aid to strengthen existing social programs rather than establishing new ones, particularly as the Trump Accounts are estimated to cost the government around $15 billion through 2034.
Despite these reservations, financial advisors are urging parents to accept the offered $1,000, comparing the accounts to established Individual Retirement Accounts (IRAs) for minors. These accounts are administered through the U.S. Treasury Department, a fact that advisors say provides a level of government security.
"It is technically through the Treasury, which gives me, as a planner, some solace," said Johnson Rhett, a certified financial advisor with Branning Wealth Management. "You’re talking about an official government website. Now it’s a completely other thing if someone says, ‘Hey, I don’t necessarily trust the government.’ But there is some safeguard with it being through that."
The program offers a $1,000 government seed deposit invested by default into a U.S. stock fund. While the money can grow untouched, financial experts suggest diversifying and utilizing other investment vehicles such as 529 plans for education savings or Roth IRAs for children with earned income.
"Don’t treat this as your only savings strategy for your child," Rhett advised in a financial planning guide. He also noted that parents can apply using IRS Form 4547 on the IRS website, a process estimated to take 5 to 10 minutes, without needing to download a specific app.
Estimates suggest that an untouched account could reach approximately $5,000 by the time the child turns 18. With an additional contribution of $250 annually, the account could grow to around $16,000 within the same timeframe. Adam Frank, head of wealth planning and advice at J.P. Morgan Wealth Management, noted that for eligible families, there appears to be no financial downside to accepting the initial $1,000, even without further contributions.
Additional contributions are possible through private entities. The Dell Foundation plans to donate $250 to accounts for children under 10 in specific zip codes, up to $6.25 billion. Dalio Philanthropies is offering a similar $250 donation for eligible children in Connecticut.
Upon reaching age 18, the account converts to a tax-deferred Traditional IRA. Withdrawals for approved purposes like education or a first-time home purchase are exempt from the 10% penalty. The penalty is fully lifted once the account holder reaches 59 1/2 years old.
"You could take the $1,000 upfront from the government … let it grow until the child is 18 and then do what you want with it," Rhett explained for those choosing not to add personal funds. "It’s similar to a traditional IRA where, unless you’re taking the money out of the account, it’s tax-deferred; there’s no tax consequence in that tax year."
Financial advisors recommend that parents consult with a financial advisor to determine the best savings strategies for their children, acknowledging that the polarizing nature of the former president may influence parental decisions. "I understand that [Trump] is a very polarizing figure and I think that’s some of the hold up for people willing to open up the accounts and accept the $1,000, and again that’s completely up to them," Rhett said. "You need to do your own due diligence or talk with your advisor about it, or some combination of both."