Starting July 4, a new type of investment account for children will officially become available. While they’re technically called 530A accounts, you probably know them as “Trump Accounts.”

At first glance, they sound pretty appealing—a government-funded contribution, tax-deferred growth, and the opportunity to build wealth for your child at a very young age.

But as with most financial planning decisions, the details matter. So let’s discuss some key features of these accounts, some drawbacks, and where they might fit into your overall financial plan.

What Is a Trump Account?

These investment accounts offer tax-deferred growth through low-cost U.S. index funds. They can be opened for any child under the age of 18, and families can contribute up to $5,000 per year (employers may be able to contribute as well, subject to certain limits and future guidance from the IRS). The funds cannot be accessed without penalty until age 18, and withdrawals are taxed similarly to a traditional IRA.

Under the legislation passed last year, children born between January 1, 2025 and December 31, 2028 are eligible to receive a one-time $1,000 government contribution into a 530A account. Children outside of that age range can still have an account opened for them, but will not be eligible for that initial “seed money.”

The Benefits: Why These Accounts Are Getting Attention

The biggest advantage is obvious: free money.

With compound interest, if your child qualifies for the $1,000 government contribution and you open an account for them—even if you never contribute another dollar—that initial investment could grow to about $4,000 over 18 years (assuming the 8% historical market average). That alone makes it worth at least opening an account. This example is hypothetical and for illustrative purposes only. It does not reflect actual investment results or guarantee future performance. Investments involve risk, including possible loss of principal, and actual returns will vary.

It also encourages early investing, which is an important skill to teach kids and teens (and, well, anyone). One of the best ways to do so is to show them the magic of compound interest in action.

This account also offers more flexibility than a traditional 529 plan. While those are designed specifically for qualified education expenses, Trump Accounts can be used to fund a home purchase, start a business, supplement retirement savings, or support other goals.

The Drawbacks & Fine Print 

While these accounts have their benefits, some of them have been slightly overstated—namely, the tax treatment.

It’s important to note that 530A accounts grow tax-deferred, not tax-free. You contribute after-tax dollars, meaning you do not receive a tax deduction for the contribution. Then, when the funds are withdrawn, the account holder pays taxes on the growth. That makes the tax treatment very different from 529 plans or Roth IRAs, where qualified withdrawals and growth are tax-free.

Another consideration is the investment lineup itself. These accounts are restricted to low-cost U.S. index funds, which certainly isn’t a bad thing—having low-cost index funds is a great strategy, and the U.S. provides great opportunities for it. But it does create limitations. With these accounts, you can’t purchase bonds for a more conservative approach or access international investments for broader exposure. Put simply, there aren’t as many diversification opportunities as you would have with a Roth or 529 plan.

There’s also a hidden risk for grandparents with these accounts. While you may be excited to help your grandbaby establish wealth early in life, check with Mom or Dad before doing so. Under current IRS guidelines, only one Trump Account can exist per child, and only certain individuals are authorized to establish it. In most cases, that authority belongs to the child’s parent or legal guardian. So while the intention may be honorable, a grandparent may not be legally permitted to open an account.

Where 530A Accounts Fit in the “Order of Operations”

This is probably the most important part of the conversation. It’s not a question of whether Trump Accounts are good or bad, but where they belong in your financial plan.

We typically recommend you do everything you can to meet your own retirement goals before investing in your child’s future. At that point, you need to consider which strategy will best help you meet your objectives. If you’re looking to tackle one of your child’s biggest future expenses (in many cases, education), a 529 plan is typically your best option. These don’t have the $5,000 contribution limit, and qualified expenses aren’t taxed upon withdrawal.

Once education has been addressed (or if that’s not a goal), we encourage young adults and even working teens to contribute to Roth IRAs because they offer tax-free qualified withdrawals and broad investment capabilities—and if you don’t need the money right away, it can continue growing tax-free until you do.

Once you’ve met your own planning goals and considered these investment options, then you might consider contributing to a 530A account.

Final Thoughts

Given that 530A accounts aren’t fully established yet, there’s likely to be some additional clarification and guidance needed in the future, and we’ll continue evaluating the pros and cons for our clients.

That said, our final take on Trump Accounts? By all means, get the $1,000 contribution if your child qualifies—after that, we recommend meeting with your advisor to see if and where a 530A account fits into your overall financial plan.

In the meantime, always feel free to reach out to us with any questions you have.