Understanding Trump Accounts: A New Way for Kids to Build Wealth

In recent times, a unique financial initiative called “Trump accounts” has emerged, aimed at helping American children develop a sound financial future. With the support of influential figures like billionaires Ray Dalio and BlackRock, these accounts promise to make wealth-building accessible for young people, ensuring they have something to fall back on as they mature.

What Are Trump Accounts?

The Trump accounts initiative was introduced in July under a major tax and spending bill signed by former President Donald Trump. The government plans to contribute $1,000 to these accounts for every American baby born between 2025 to 2028. The goal is simple yet impactful: To give children a head start in life by helping them accumulate wealth as they grow.

Recently, Michael and Susan Dell made headlines by donating a substantial $6.25 billion to support these accounts for older children. Following their lead, names like Ray Dalio and firms such as BlackRock have also stepped up to contribute, setting an inspiring example for other wealthy individuals and corporations to follow.

How Do Trump Accounts Work?

The mechanics of these accounts are straightforward. Each Trump account will have an annual contribution limit of $5,000. This cap allows parents, family members, and even employers to contribute over time. Interestingly, state and local governments may also add money to these accounts without facing the same limit.

One of the unique features of Trump accounts is that they will be locked until the child reaches 18. At that age, the funds can be accessed for specific purposes such as education or buying a first home, without any penalties. The accounts can only be created once per individual, and investments must primarily be in mutual or exchange-traded funds that focus on U.S. stocks.

Another interesting aspect is that organizations can make contributions based on where children live. So, if you’re a parent or relative looking to invest in a child’s future, you can start contributing as soon as they are born.

Impact of Contributions from Business Leaders

The support from business leaders indicates a larger trend where corporations are stepping in to support public initiatives. Dalio’s foundation has committed to donating $250 to approximately 300,000 Trump accounts for kids in Connecticut. BlackRock plans to match federal contributions for their employees’ children, essentially seeding their accounts with $1,000 each.

The Dells’ massive $6.25 billion pledge is especially significant as it targets around 25 million American children under the age of ten. By contributing $250 per eligible account, their hope is to inspire other wealthy individuals to contribute as well, thereby creating a ripple effect of generosity.

What Can Beneficiaries Do with Their Funds?

Once a child turns 18, they can access their Trump account funds. The money can be used for expenses like education, purchasing a first home, or even for some childcare expenses. However, if anyone attempts to withdraw funds for non-qualifying reasons, a 10% penalty may apply.

Tax Advantages of Trump Accounts

One huge benefit of Trump accounts is that they grow tax-free until withdrawal. This means that while any money put in by parents will not be taxed, funds received from the government or philanthropic organizations will be taxed as ordinary income upon withdrawal. It’s important for account holders to understand these implications since the tax rules can be complex.

Comparing Trump Accounts with 529 Plans

While Trump accounts offer some benefits, they fall short when compared to 529 college savings plans. The latter offers higher contribution limits and tax-free withdrawals for qualified educational expenses. In contrast, Trump account holders will need to pay taxes on their withdrawals.

Cost to the Federal Government

According to estimates from the Congressional Budget Office, the Trump accounts program will cost the federal government around $15 billion over the next decade. Although this seems significant, it’s relatively minor in the context of the overall tax and spending bill passed in July.

Origins and Opinions on Trump Accounts

The concept of government-funded “baby bonds” was first proposed by economist Darrick Hamilton, who aimed to help low-income families build wealth and reduce the racial wealth gap. There are mixed opinions about these accounts. While some believe they are a step in the right direction, skeptics argue that they may not effectively address wealth inequality.

Some economists, like Greg Leiserson, voice concerns that tax-advantaged accounts primarily benefit families that already have financial stability, leaving those in need still unable to access significant support.

In summary, Trump accounts present an interesting opportunity for the future generation, combining wealth-building and financial education in a structured manner. As families and communities begin to engage with this initiative, it will be crucial to monitor its impact and ensure it truly benefits those who need it the most.

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Original Text – https://fortune.com/2025/12/17/trump-accounts-for-kids-get-funding-boost-from-dalio-and-blackrock/