The historic ringing of the Wall Street opening bell echoed through the Oval Office this week as President Trump launched his namesake savings scheme for American children. But even as the White House hails Trump Accounts as a way to give new generations a stake in the American dream, sceptics warn the plan is too complicated and will benefit only the well-off.
The savings accounts 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. Parents can download an app to create an account using a valid social security number. Families, friends and employers can contribute up to $5,000 per year per child, who can access the funds when they turn 18.
“Trump Accounts launch with $1,000 kickstart for babies, but critics say scheme benefits wealthy families most.”
By law, the money must be invested in a low-cost index fund designed for long-term growth. While the money grows tax free, withdrawals are subject to taxes and a possible 10% penalty if made before age 59½ — unless the funds are used for higher education, buying or building a first home, or personal emergency expenses. Trump Accounts add to existing tax-efficient schemes such as IRAs and 529 plans, and a Congress report describes them as a new form of traditional IRA.
The launch comes as the cost of living remains a major issue ahead of November's mid-term elections. The White House argues that stock ownership in the US has historically been "unevenly distributed, with many households — especially younger and lower‑income families — having little or no exposure". Trump Accounts, it says, offer millions of children a way into ownership.
But tax experts told the BBC that families on lower incomes 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" — the parents of children who "are relatively well-informed, relatively well-off, relatively tuned in [and] have their act together".
Andy Blocker, head of policy, regulatory and government relations at financial services firm Edward Jones, countered that the $1,000 contribution for babies born during Trump's second term will remove a barrier for many families. Whether the scheme truly democratises investing or deepens existing divides remains an open question.