Surprise, Your Child Has a ‘Trump Account.’ Here’s What to Know.

The Treasury Department has launched a new type of savings account called "Trump Accounts" for children under the age of 18. Each eligible child will receive a $1,000 seed investment from the government, which will grow on a tax-deferred basis. The accounts will automatically be enrolled in eligible children's names, with additional donations from philanthropists starting to flow in. Parents or guardians must claim the accounts to request the $1,000 and make their own contributions.

While the $1,000 seed money is a good deal, the accounts can also benefit children who don't qualify for that specific amount. Employers, state and local governments, and charitable organizations with wealthy benefactors may contribute to the accounts. For most families, it is recommended to use more flexible and tax-advantageous savings plans, such as 529 education savings plans, instead of adding their own money to the Trump Accounts.

Eligible children are those with a Social Security number who are under age 18 at the end of the year the account is established. A pilot program will seed the accounts with $1,000 for children born between January 1, 2025 and December 31, 2028 who are U.S. citizens and have a Social Security number. The accounts can be rolled over to other financial institutions, with Vanguard already supporting rollovers.

The accounts currently offer the State Street SPDR Portfolio S&P 500 ETF as the investment option. Contributions from parents, relatives, friends, and employers can be made, with limits of $5,000 annually for after-tax dollars and $2,500 annually for employers. Philanthropic contributions of stock are also accepted, and the money can be withdrawn on the child's 18th birthday, subject to taxation.