The clang of the Wall Street opening bell echoed through the Oval Office this week as Donald Trump marked the launch of Trump Accounts, a new savings scheme aimed at coaxing American children into stock ownership. But even as the White House hails the project as a way to give new generations a stake in the American dream, sceptics argue it is too complex and risks leaving the poorest families behind.
The accounts are now available to every US child under 18, with babies born between 2025 and 2028 receiving a $1,000 government contribution to kick-start their savings. Parents can open an account by downloading an app, and families, friends and employers may contribute up to $5,000 per year per child. The money must be invested in a low-cost index fund designed for long-term growth, and the child can only access the funds when they turn 18.
“Trump Accounts launch with $1,000 for newborns, but critics warn only wealthy families will benefit.”
By law, the money grows tax-free, but withdrawals are subject to taxes and a 10% penalty if taken before age 59½, unless the funds are used for higher education, buying a first home, or personal emergency expenses. According to a Congress report, Trump Accounts are a new form of traditional individual retirement account (IRA) with different rules. They add to existing tax-efficient savings options such as IRAs and 529 college savings plans.
The White House argues the scheme gives millions of children exposure to stock ownership, which it says has historically been "unevenly distributed, with many households – especially younger and lower-income families – having little or no exposure". But tax experts told the BBC that lower-income families could lose out and that the scheme is too complicated.
Will McBride, chief economist at the Tax Foundation think tank, said the complexity would lead to a "minority that benefits". He predicted that those who take advantage will be the parents of children who are "relatively well-informed, relatively well-off, relatively tuned in [and] have their act together". In contrast, Andy Blocker, head of policy, regulatory and government relations at financial services firm Edward Jones, said the $1,000 contribution for babies born during Trump's second term would remove a barrier for many families.
With the cost of living remaining a major issue ahead of November's mid-term elections, the scheme's success may hinge on whether it reaches the households that need it most – a question that critics say remains unanswered.