An historic ringing of the Wall Street opening bell in the Oval Office this week marked the launch of Trump Accounts, a new savings scheme aimed at encouraging investing among American children. The accounts, named after the president, are now available to all US children under 18, with babies born between 2025 and 2028 qualifying for a $1,000 contribution to kickstart savings. But sceptics question whether the project will deliver on the White House's promise of giving new generations a stake in the so-called American dream.
The move comes as the cost of living remains a major issue ahead of November's mid-term elections. The accounts can be created for anyone under 18 with a valid social security number via a downloadable app. Families, friends and employers can contribute up to $5,000 per year per child, who can access the funds at age 18. By law, the money must be invested in a low-cost index fund designed for long-term growth. While contributions grow tax-free, withdrawals are subject to taxes and a possible 10% penalty if made before age 59½, unless the money is assigned to higher education, buying or building a first home, or personal emergency expenses.
“Trump Accounts launch with $1,000 for newborns as critics warn scheme favours wealthier families.”
Trump Accounts add to existing tax-efficient savings schemes such as IRAs and 529 plans. According to a Congress report, they are a new form of traditional IRA with different rules. The White House argues the scheme offers millions of children a way into 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 reaction has been split. Will McBride, chief economist at the Tax Foundation think tank, says the scheme is too complicated to sign up to, leading in his view to a "minority that benefits" – parents who are "relatively well-informed, relatively well-off, relatively tuned in [and] have their act together". Tax experts told the BBC families on lower incomes could lose out and that the scheme is too complicated. Andy Blocker, head of policy, regulatory and government relations at financial services firm Edward Jones, believes the $1,000 contribution for babies born during Trump's second term will remain a positive, though the broader impact remains to be seen. With mid-term elections approaching, the success of Trump Accounts may test whether the gamble on youth investment pays off.