Suze Orman says Trump Accounts' free $1,000 is worth grabbing — but parent contributions can backfire

Personal finance expert Suze Orman suggests that taking the government's offer of a free $1,000 deposit for a child's future is a smart move, but parental contributions to Trump Accounts can be counterproductive. Trump Accounts, introduced last month, provide eligible children with a $1,000 deposit into their accounts, with some employers contributing up to $2,500 per employee.

Orman advises that one should never turn down free money, but parental contributions can be misguided if not managed properly. Debt repayment, emergency savings, and personal retirement savings should take precedence over investing in a child's future. If teenagers are earning income, a Roth IRA might be a better option, as contributions are made after taxes and grow tax-free.

However, Trump Account contributions are made with after-tax money, and 100% of earnings withdrawn will be taxed as ordinary income.