Donald Trump proposes creating individual investment accounts for children born between 2025 and 2029 (coinciding with his term in office), in addition to providing a one-time contribution of $1,000 for each account. The goal of these types of accounts, dubbed “Trump Accounts,” is, according to the US president, “to foster financial security from an early age and provide a concrete tool to reduce economic inequality over the long term.”
‘Trump accounts’ function like a typical investment account
People could only contribute to the accounts with income that had already been taxed, and the accounts’ earnings would also be taxed when withdrawn. This would appear to make the “Trump account” function like a typical investment account, rather than a tax-advantaged one like an individual retirement account or health savings account.
Under the bill, children born between January 1, 2025, and January 1, 2029, would receive the money, which would be invested on their behalf in the stock markets. When they grew up, they could withdraw the earnings to pay for certain expenses, such as going to college or buying a home. The child’s parents, or other third parties, could also contribute to the account.
All of this is included in the One Big and Beautiful Bill. “This is a pro-family initiative that will help millions of Americans take advantage of the strength of our economy to raise the next generation,” Trump told the media. “They’re really going to get a big boost in life, especially if we get a little lucky with some of the numbers and the economy.”
Assuming the accounts earned 7% interest, the $1,000 would grow to approximately $3,570 in 18 years. Some economists argue that this proposal, rather than creating equality, actually creates the opposite, as the same amount is given to a child born into a low-income background as one born into a more privileged situation. “It’s going to accentuate inequality,” says Darrick Hamilton, an economist at The New School.
How to Access These ‘Trump Accounts’
To apply for these funds, at least one of the child’s parents or guardians must have a Social Security number authorized to work in the U.S. If approved, the money would be automatically deposited upon registration of the child’s birth in the national system. By the way, the ‘Trump Accounts’ was originally going to be called the MAGA account, but it was ultimately decided that it wasn’t appropriate to use the name of the political movement.
This idea stems from the U.S. voucher programs for low-income families, albeit in a different way. The original proposal was for a universal program administered by the government, not by private investment funds, that would provide children from low-income families with a larger benefit, with the goal of narrowing the gap between rich and poor.
This is not a real solution for low-income families
On the other hand, to cover these funds, the Trump administration proposes: reallocating funds from redundant social programs, imposing a new carbon tax on imported products, and reducing tax deductions for some companies. For some, as we mentioned earlier, this is not a real solution since low-income families not only need aid for 18 years from now, they need funds now. That’s why some groups are calling for more aid for food, education, and healthcare, aid that benefits them ipso facto.
