Saving for a child’s future is an important part of every parent’s financial plan, but for many, the task can be daunting.
According to a recent LendingTree study*, raising a child to adulthood costs around $303,000. This total excludes college costs, job training, or future expenses your kid might need.
That's where Trump Accounts enter the fray — and the rollout is moving faster than anticipated.
Introduced in the 2025 Trump tax bill, so-called Trump Accounts will allow parents, relatives, and others to contribute up to $5,000 annually for a child’s future educational, homeownership, and other qualified expenses.
The federal government will also seed this tax-advantaged account with $1,000.
The savings then grow tax-deferred until the child reaches 18. At that point, there could be tens of thousands of invested dollars for your child’s use.
Now, the program is officially entering its next phase. The U.S. Department of the Treasury recently launched the official Trump Account mobile app ahead of the July 4 rollout date, and has begun sending out account activation instructions to millions of families who opted in during tax season.
But if the savings account idea sounds familiar, that’s because it is. Democrats have proposed "baby bonds" in the past, which would also offer $1,000 seed money to eligible children, but failed to gain bipartisan support.
How is a Trump savings account any different? And should you open one in 2026 and make contributions?
Read on.
*Note: LendingTree researchers used various data sources, incorporating multiple expenses related to rent, food, health insurance, etc., to calculate the cost of raising a child in a two-income household.
Trump kids account for newborns
Under the Trump tax bill, the GOP created a provision for Trump Accounts applicable to kids under age 18.
Overseen by the Treasury, these savings accounts are touted by supporters as a new way to help pay for higher education, homeownership, and other qualified expenses that account holders might incur.
Parents of eligible children can request to open an account today.
The sign-up process for a Trump Account starts by using Form 4547. After receiving the application, the U.S. Treasury Department will provide further instructions via email from no-reply@TrumpAccounts.Treasury.gov.
(However, funding the accounts, including the $1,000 federal seed money for eligible children, won't be open until at least July 4, 2026, per the official Trump account website.)
But while legal guardians have first say in opening a Trump Account for their child, the IRS proposed regulations outline the legal priority in which all authorized individuals may open an account:
- Legal guardian
- Parent
- An adult sibling
- Grandparent
One of these authorized individuals must open a Trump Account on or before December 31 in the year in which an eligible child turns 17. Only one account is allowed per child.
For more information on how to open a Trump Account, check out Kiplinger's report, Trump Account App Is Live: How to Claim Your Kid’s $1,000 in 3 Easy Steps.
Who is eligible for Trump Accounts for kids?
To be eligible for the proposed Trump Account, qualifying children will need to be:
- Under 18 years old
- U.S. citizen
- Have a Social Security number (SSN) with at least one parent with a valid SSN (or individual taxpayer identification number)
And, according to the IRS, the funds in Trump Accounts must be invested in certain mutual funds or exchange-traded funds, like those that track the S&P 500 or another index of primarily American equities.
How to contribute to a Trump child savings account
Several individuals can contribute to a child’s savings in the new Trump Account tax provision, including:
- Parents and legal guardians
- Family, friends
- Employers
- Governmental agencies and nonprofits
Employer contributions will be capped at $2,500 for Trump Accounts. Parents and relatives can contribute up to $5,000 of after-tax dollars annually. Government or nonprofit contributions will not count against the annual $5,000 limit, but the employer portion will count toward it. (Note: The proposed IRS regulations index the yearly limit for inflation after 2027.)
And there's another catch: Contributions can't be made into a Trump savings account after the child reaches age 18.
Trump Account distributions: Qualified expenses
Certain rules will govern account distributions depending on the account holder’s age and whether an expense is "qualified" or not. No distributions will be allowed until the child reaches 18 (see below for a few exceptions).
After that age, the account is treated akin to an individual retirement account (IRA).
According to the latest information provided by Congress.gov, here is a list of qualified withdrawals:
- Higher education expenses,
- First-time home purchases (up to $10,000),
- Personal emergency expenses (up to $1,000),
- Health insurance premiums during unemployment, or medical expenses that qualify for the medical expense deduction ,
- Specific situations, like disaster-related costs or expenses related to the birth or adoption of a child (up to $5,000 in the year of the birth/adoption).
Other withdrawals will be subject to a 10% early distribution penalty (until the beneficiary of the Trump Account reaches age 59½). However, there are a few instances where a distribution from a Trump account will be allowed if a child has not yet reached age 18.
- Some rollovers to an Achieving a Better Life Experience ( ABLE ) account (though the child must be at least 17 and the entire account balance must be transferred).
- The rollover of the account to a different Trump Account.
- To correct an excess annual contribution.
- If the beneficiary has died, become totally and permanently disabled, or been diagnosed with a terminal illness.
- The beneficiary is called to active duty as a qualified reservist for at least 179 days.
Would Trump savings accounts for children get taxed?
Contributions to a Trump Account might be made with after-tax dollars. But withdrawal taxation might depend on the source and type of income.
- For instance, distributions for qualified expenses from funds received by an employer might be taxed at the ordinary income federal tax bracket rate when distributed.
- But distributions for qualified expenses from parents might not be taxable.
Any interest from the account grows tax-deferred and could be taxed as ordinary income when withdrawn. Some suggest that even the $1,000 seed money given by the government will be taxed when distributed.
Overall, the tax treatment of a Trump Account is expected to be similar to that of an IRA.
Yet, it's important to note that finalized guidance from the IRS on the taxability of these accounts is needed before implementation this year.
Trump Account for kids: $1,000 match
Under the federal pilot program, qualifying children can receive a $1,000 match deposited directly into their Trump Account. However, this specific incentive is reserved for children born between January 1, 2025, and December 31, 2028.
While early versions of the 2025 tax law suggested a universal, automatic rollout of Trump Accounts, the Treasury has since shifted to an "opt-in" approach. This means the responsibility now lies with parents to proactively enroll their children to secure the account and claim the $1,000 Trump Account match (if eligible).
Child savings accounts aren’t new
While the Trump savings account is new, it’s important to note that the idea behind the account isn’t the first of its kind.
Democrats have also pitched a similar notion about eight years ago, when Sen. Cory Booker (D-N.J.) proposed the creation of a savings account, baby bonds, with $1,000 seed money for newborns.
At the time, Booker posted on Twitter (now X): “We need to close the wealth gap and give every child born in the U.S. a fair shot at the American Dream — my baby bonds proposal is a clear path.”
However, Booker’s proposal struggled to gain bipartisan support.
There are also several key differences between a Trump Account vs. the baby bonds that Booker proposed:
- While Trump Accounts are to be contributor-funded (outside the pilot program), Booker’s baby bonds would've been funded by the federal government.
- Under Booker’s proposal, contributions would have been made based on family income, with potentially larger initial deposits for lower-income families, while Trump Accounts rely more on “who you know.”
- The baby bonds idea was designed to “substantially close the racial wealth gap,” while the Trump Accounts are formulated to “help produce new capitalists,” Sen. Ted Cruz (R-Texas), who initially proposed the savings account initiative, told Semafor .
“[Booker’s proposal] is just a government program,” Cruz said, “Where this [Trump Account] is very much designed to get the next generation to invest in the market.”
Interestingly, Cruz and Booker recently collaborated on a joint bipartisan letter sent to Fortune 1000 CEOs. The letter encouraged corporations to use Trump Accounts for corporate employee matching.
For a list of current companies that have pledged to match the new initiative, check out Kiplinger's report, How to Claim Your Kid's $1,000 Trump Account Match.
Stay tuned for more updates.
This article has been updated to reflect proposed IRS guidance and recent announcements by the U.S. Treasury.
