Key facts
- New 'Trump Accounts' launched July 4, offering a new investment avenue for children.
- Eligible children born between 2025-2028 receive a $1,000 government deposit.
- The accounts are managed via an app developed by Robinhood and BNY Mellon.
- Five stock fund options are available, with SPDR Portfolio S&P 500 ETF as the default.
- Funds grow tax-free, similar to an individual retirement account.
The U.S. government has launched 'Trump Accounts,' a new investment initiative for newborns, with the first accounts going live on July 4. Established as part of the One Big Beautiful Bill Act passed last year, these accounts aim to encourage early investment for children.
Eligible children born between 2025 and 2028 will receive a one-time $1,000 deposit from the government, which will be invested in the stock market. While children born outside this window can also open accounts, they will not receive the government handout. However, some donors are reportedly offering funds based on other criteria.
Parents can contribute up to $5,000 annually to their child's account, and employers can contribute up to $2,500 per year. Similar to individual retirement accounts, Trump Accounts offer tax advantages, with funds growing tax-free.
The accounts can be opened with the Internal Revenue Service and managed through a dedicated app developed in partnership with Robinhood and BNY Mellon. The core idea is to leverage the power of compounding returns by starting investments at a very young age.
Account holders have a choice of five different stock funds. For those who do not wish to select a specific fund, the State Street SPDR Portfolio S&P 500 ETF (SPYM) is designated as the default investment. This ETF tracks the S&P 500 index, providing broad exposure to the U.S. stock market, with a particular weighting towards technology stocks. The fund was chosen for its broad market exposure and low expense ratio of 0.02%.