What is a ‘Trump account’ and how can it help new parents and their babies?
Had a baby recently or planning one in the next few years? The federal government could give you $1,000.
The tax bill the Senate is considering includes that feature, which has already been approved by the House. The Senate is expected to debate the measure, part of its massive One Big, Beautiful tax and spending plan, this week
Under the plan, qualifying parents of newborn children through December 31, 2028 will receive $1,000 for what’s being called a Trump Account. It could be opened by a parent or guardian.
The parents must be U.S. citizens and have Social Security numbers.
The child can use the money, which would be invested throughout their life, after they turn 18, when they can take out as much as half the money. They can take the full amount once they turn 25. The funds can be used for education, an initial home purchase or a small business. In theory that would help parents who had saved for one of those purposes. Parents can opt out of the account, and if they don’t open an account, the government can do so.
Parents or others can put a total of $5,000 annually into the child’s account over the years. Taxes on the fund and its earnings would be deferred until withdrawn.
“This will afford a generation of children the chance to experience the miracle of compounded growth and set them on a course for prosperity from the very beginning,” said a statement from the White House.
NerdWallet, which helps consumers with financial decisions, calculated the potential value of the accounts for The Bee. It used its investing calculator and assumed a 3% annual interest rate compounded annually over 18 years.
If contributions were $1,000 annually, the total at age 18 would be $25,116.87. If contributions totaled $5,000 a year, the total at age 18 would be $118,774.61.
The figures assume a starter investment of $1,000 from the government. One caveat noted by NerdWallet’s investing specialist, Kate Ashford: “Because those funds will be invested in some kind of low-cost U.S. stock index fund, there will likely be a small expense ratio that slightly reduces returns, so the end result won’t be precisely what we’re calculating, even if all conditions are met.”
Parents need money
Bankrate, which specializes in personal finance, has done regular surveys asking people about emergency savings.
About 40 percent in its annual Emergency Savings Report, released in March, said they could pay for an emergency of $1,000 or more through their savings.
But for others, “one of the chief financial regrets is failure to save for emergencies and retirement,” said Mark Hamrick, senior economic analyst at Bankrate.
Saving has become more difficult in recent years. Younger people face a financial world where companies are largely foregoing guaranteed pensions, the cost of college as well as student loan debt has soared, and housing in many urban areas is barely affordable.
As a result, “anything that helps or compels younger Americans to save more, on the face of it, has virtue,” said Hamrick.
There are some reservations. The accounts would add to the national debt, which most analysts say could eventually trigger a financial crisis and higher interest rate.
There’s also some concern that the accounts “add another layer to an already over-complicated savings account system in the United States,” said Alex Muresianu, senior policy analyst at Washington’s Tax Foundation.
He also saw the accounts as another task for the Treasury Department and Internal Revenue Service, “which are already bogged down with administering the existing plethora of savings accounts,” Muresianu said.
Hamrick, though, said there are ways people can learn more about the accounts, including talking to a financial adviser.
How CalKIDS helps
In California, the federal account would complement a similar program for newborns, and it would continue regardless of what Washington decides. There are no plans to merge the accounts at this time.
CalKIDS said in an email to The Bee that currently, any child born in California on or after July 1, 2022, has a CalKIDS Scholarship worth up to $175 waiting in their name under the state’s CalKIDS Program.
In addition, eligible California public school students in grades 2 through 12, as well as college-aged students previously identified as eligible when they were in high school, have a CalKIDS Scholarship worth $500 waiting in their name.
An additional $500 is designated for foster youth and another $500 is designated for students experiencing homelessness, for a total of up to $1,500 in scholarships for college and career training.
CalKIDS is the largest child development account program in the nation, with over 5 million children enrolled, including nearly 4 million eligible public school students and over 1 million newborns and young children.
The Trump account proposal is thought to have broad support. Sen. Ron Wyden, D-Oregon, top Democrat on the tax-writing Senate Finance Committee, recalled how former Sen. Bob Casey, D-Pa., had been a booster of the idea. His plan last year would have given lower-income children help in their accounts.
“We’re going to have to look at how (the new plan) is constructed,” he said, “but I worked very closely with Bob Casey.”
This story was originally published June 23, 2025 at 5:00 AM with the headline "What is a ‘Trump account’ and how can it help new parents and their babies?."
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