The New Trump Account for Kids: Free Money, With a Catch

“Compound interest is the eighth wonder of the world. He who understands it, earns it…he who doesnt…pays it.”

-Albert Einstein

The Trump account is a new type of account for kids. It can be free money — with a catch.

It works like a traditional IRA. But there are several differences you need to know.

What makes it different?

First, there’s no income requirement. The child doesn’t need to be working to get contributions. And the money can come from anywhere — an employer, parents, grandparents, even birthday money. You can add up to $5,000 a year, and it goes into low-cost U.S. stock index funds.

Second, the contributions aren’t tax-deductible. That’s going to matter later when we talk taxes.

Third, a Trump account doesn’t affect how much you can put into your own IRA. So you can really do both.

Can you get free money?

Yes. The government puts in a one-time $1,000 for each eligible child. The child has to be a U.S. citizen born between January 1, 2025, and December 31, 2028. They need a valid Social Security number. And the parents have to file an election to claim it.

What happens at 18?

It works like an IRA, but with some differences. Generally, this is built for retirement. When the child turns 18, they may be able to convert it into a Roth IRA and pay the taxes then.

Here’s how the taxes work

Since this is a retirement account, the money’s meant to stay put. Take it out before 59½ and you’ll pay a 10% penalty on the taxable portion — unless you qualify for an exemption.

And when it comes out, only the money you put in with your own dollars comes out tax-free. Everything else — the government’s $1,000, any employer money, and all the growth — gets taxed at ordinary income rates.

A Trump account also needs to be kept separate from the child’s other IRA accounts. So the taxable and tax-free portions never get blended.

What about saving for college?

If you’re saving for college, a 529 plan is better. You get tax-free growth for qualified education expenses.

---

Jeremy Finger, Founder

Jeremy grew up in Nichols, South Carolina, where fishing with his dad sparked a lifelong interest in how money shapes our lives. Since becoming a financial advisor in 1996, he’s helped people navigate life’s biggest moments—and today, with Riverbend, he offers a calm, personal approach that helps clients focus on what matters.

---