Key facts
- Trump Accounts are available to US children under 18.
- Babies born between 2025-2028 receive an initial $1,000 contribution.
- Annual contributions are capped at $5,000 per child.
- Funds must be invested in low-cost index funds.
- Withdrawals before age 59.5 incur a 10% penalty unless for approved uses.
- Six million families signed up prior to the July 4 launch.
The Trump administration has launched 'Trump Accounts,' a new savings initiative designed to encourage investment among American children and provide them with a stake in the economy. The scheme, available nationwide for children under 18, allows contributions of up to $5,000 annually per child from families, friends, or employers. Funds are mandated to be invested in low-cost index funds for long-term growth. While growth is tax-free, withdrawals are subject to taxes and a potential 10% penalty if made before age 59.5, unless used for approved purposes like higher education or a first home. Proponents argue the accounts will increase stock ownership, particularly among younger and lower-income families, with an initial $1,000 contribution for babies born between 2025 and 2028. Critics, however, deem the scheme too complex and suggest it may disadvantage lower-income families due to withdrawal penalties, potentially requiring them to access funds at age 18 and incur penalties. Prior to its July 4 launch, six million families had signed up, with over half a million accounts receiving the initial subsidy. Projections suggest the initial $1,000 could grow to $6,000 by age 18, or significantly more with maximum contributions. The initiative has garnered support from BlackRock, Visa, and Dell.