Can Trump Accounts help kids build wealth? A finance expert weighs in | CU Boulder Today

For parents, the pitch behind the new Trump Accounts is simple: Start investing early, let compound growth do its work and give kids a financial head start. 

The new tax-advantaged accounts, introduced in early July, allow families to save and invest on behalf of children under 18, with eligible children born between 2025 and 2028 receiving a one-time $1,000 contribution from the federal government. 

“One of the most important things about saving and investing is to take advantage of time when it is on your side,” said Michael Gropper, assistant professor of finance at the Leeds School of Business. 

CU Boulder Today recently spoke to Gropper, who studies household finance and retirement savings, to answer some of the biggest questions families may have about the new accounts.

What exactly are Trump Accounts? 

Trump Accounts, also known as 530A Accounts, were created as part of the One Big Beautiful Bill Act passed in 2025. They’re financial savings accounts designed to help families save for their children’s futures and can be opened for children under 18 with a valid Social Security number.

How do they differ from other savings and investment accounts?

In many ways, Trump Accounts resemble traditional individual retirement accounts, or IRAs, because they are designed for long-term investing. However, they differ from a traditional bank savings account or brokerage account in several important ways.

First, contributions are limited to $5,000 per year, and the money is automatically invested in the stock market through a low-cost, diversified index fund. Second, there are restrictions on when and how the money can be used. Funds generally cannot be accessed until the child turns 18, and certain rules govern what they can be spent on. If the money isn’t used, the account effectively transitions into a traditional IRA.

Taxes are another important difference. The exact tax treatment of Trump Accounts is still evolving, but like many retirement-focused accounts, withdrawals and investment gains may be taxed differently than assets held in a standard brokerage account. That can make the accounts more complicated than they first appear.

What do you see as the program’s biggest potential benefits?

One of the biggest potential benefits is helping more families participate in the stock market.

According to the Federal Reserve’s Survey of Consumer Finances, just under 60% of American households own stocks. But participation varies dramatically by income. Only about one-third of families in the bottom half of the income distribution invest in the stock market, compared with nearly 95% of families in the top 10%.

The fact that Trump Accounts are automatically invested in a low-cost stock market index fund may help some families begin investing when they otherwise would not.

While investing in stocks carries more risk than keeping money in a bank savings account, the rewards have historically outweighed those risks over long periods of time.

What are the biggest misunderstandings you’ve seen about these accounts so far?

The first thing families should understand is that not everyone qualifies for the federal government’s $1,000 seed contribution. That benefit is available only for children born between Jan. 1, 2025, and Dec. 31, 2028.

The second misconception is that the money is easily accessible. Trump Accounts come with meaningful restrictions. Funds generally cannot be withdrawn before the child turns 18, and even after that, the IRS has rules governing what expenses qualify.

For example, the money can be used for qualified educational expenses at age 18. But unlike a 529 plan, the amounts withdrawn from a Trump account for educational expenses are still subject to taxes. For families whose primary goal is paying for education, a 529 plan may often be the better choice, as the earnings from a 529 plan are not taxable when used for qualifying education expenses.

If a family has limited money to save, what should they prioritize? 

For most households, the first priorities should be paying down high-interest debt and building an emergency savings fund, often equal to three to six months of expenses. After that, families can think about balancing shorter-term goals with long-term retirement savings.

I would encourage families to think of Trump Accounts primarily as long-term retirement savings accounts for children, with a little extra flexibility beginning at age 18.

Parents who are specifically saving for a child’s education may find that a 529 plan makes more sense. Those plans are designed for education expenses and offer their own tax advantages.

Ultimately, the best choice depends on a family’s broader financial situation, including retirement goals, expected future expenses and whether they have access to benefits such as employer retirement-plan matching.

Some project that a $1,000 contribution could grow to a half-million dollars by age 55. Is this realistic?

The Trump Accounts website highlights projections showing that a $1,000 contribution at birth could grow to about $6,000 by age 18, $15,000 by age 27 and nearly a quarter-million dollars by age 55, even without additional contributions.

Those estimates appear to assume annual investment returns of about 10.5%. That’s somewhat optimistic, but it’s not unreasonable based on long-term historical stock market performance.

The key thing to remember is that these projections assume average returns. In reality, stock market performance varies significantly from year to year. The S&P 500 posted negative returns from 2000 through 2002, for example, before gaining more than 25% in 2003.

In other words, assuming a steady 10.5% annual return can hide what may feel like a roller coaster ride for investors. That being said, it is important to emphasize that money invested in the stock market tends to grow in the long run, despite enduring ups and downs along the way.  

What’s the most important thing parents should understand about saving and investing for a child’s future?

Saving even a small amount when children are young can make a meaningful difference because investment gains compound over time. According to projections from the Trump Accounts website, contributing a little more than $20 per month could increase the amount available at age 18 from roughly $6,000 to $19,000. Continuing those contributions through age 27 could increase the balance from about $15,000 to more than $50,000.

That kind of growth is difficult to achieve with a typical bank savings account.

I think it’s critically important for people to learn how to invest responsibly, both for themselves and for their children. The fact that Trump Accounts are automatically invested in a low-cost, diversified index fund is a positive feature.

What are some common mistakes parents should avoid when thinking about long-term investment accounts for their children?

One common mistake is underestimating the complexity of these accounts. Like other tax-advantaged investment vehicles, Trump Accounts come with rules governing taxes, withdrawals and eligible uses. Those details can create headaches later if families don’t understand them upfront.

The second mistake is delaying the decision to start saving because they assume they can always do it later. While that’s technically true, waiting has a real cost. Every year spent on the sidelines is a year of potential investment growth lost.Despite the complexity that sometimes comes with investment accounts, it’s generally worth getting started sooner rather than later.