There’s a new type of savings account for children in the United States; and it comes with an initial gift of $1,000. These accounts are part of one of the laws approved by the “One Big Beautiful Bill,” and created so millions of children have an investment in their name since the moment they are born. In addition, a large donation from the Dell family will help more children, especially from low- and middle-income areas, also have access to this type of long-term savings.
During a press conference, President Donald Trump explained that, “Trump accounts will be the first, I guess you could say, real trust funds for every American child. It allows family members, employers, corporations, and generous donors to contribute money that will be invested and grow over the course of a child’s life to be used for their benefit after they turn 18.”
How Trump accounts work
The Trump accounts are savings accounts with tax advantages created for children born in the United States between January 1, 2025 and December 31, 2028.
Every account will receive a one-time contribution of $1,000 from the federal government starting next year. The funds are placed in a broad stock market index: A broad index of the stock market that groups many different companies. The idea is that, over time, that investment can grow along with the market.
Family and friends can also contribute throughout the year but the limit is set at $5,000 per year. The White House has explained that, if the account is financed to the maximum and the money is not touched, it could grow up to $1.9 million when the person turns 28.
But there are some rules about how the money is handle: The funds cannot be taken out before the kid has at least 18 years old. After that, they can but withdrawals are taxed with a higher tax rate, similar to the penalty for withdrawing money from an IRA account before the age of 59.
To set the account, parents can use the IRS Tax Form 4547 and choose the options they want for their kids.
At the moment, the tax agency has only published draft versions; the final form is not yet available.
The huge donation of the Dell family
The Dell family, known in the world of technology, announced a donation of $6.25 billion for accounts of this type. The goal is to reach more children who do not enter the federal program, especially in low- and middle-income areas.
In a statement, Michael and Susan Dell, through the Dell Foundation, explained: “Our gift will cover most of the children who are 10 and under who are not part of the federal program. The zero to two year olds and who also live in zip codes where the median income is $150,000 or less. We believe this is the greatest investment we can make in our children.”
What it means for families and their children’s future
Both Trump accounts and the donation from the Dell family, create long-term savings that accompanies children as they grow up.
However, for the government, these millions spent in accounts is not a charity; It will make Wall Street stronger, transfer risk to the individual and create future taxpayers more aligned with the financial market.
If millions of children have money invested in the stock market since they are born, they will grow up with the idea that their future depends on the financial market.
Investing is a fund for your child’s future is not bad, but it is important to understand what’s behind the initiative, and the risks. Experts suggest a minimum of financial knowledge before making any investment. And a proposal as attractive but regulated like these children savings accounts, should be looked at carefully.