The new savings plan for kids is just being set up, but advocates already have ideas for fixing shortcomings they see and expanding the program.
The Trump administration is gearing up to create investment accounts for millions of children — and in the process, advocates hope, create a new generation of capitalists.
The initiative, tucked into Republicans’ domestic policy megabill, is not only aimed at building nest eggs for kids, with the government providing $1,000 in seed money for those born in the next four years. At a time when economic anxiety is mounting, the government also wants to convince young people and their families of the benefits of investing by experiencing it for themselves.
“The American economy has worked remarkably well at fostering innovation and wealth creation, but if you haven’t been an owner of assets that compound like equities, you haven’t participated in that value creation, and this is a way to bring people into that experience,” said Matt Lira, executive director at Invest America, which was a key behind-the-scenes force in persuading Republicans to include the initiative in the One Big Beautiful Bill Act.
“They need to experience that system for themselves and, hopefully, have a more favorable opinion of it once they learn how it can work for that.”
The plan comes with some real limitations — the tax benefits, for example, are skimpy, and the government is kicking in a lot less money than Democrats would like. But with more than 60 million kids eligible for the program, advocates hope it snowballs, so that the more people participate, the bigger the political constituency it will have. That, in turn, would force lawmakers to beef up the plan’s benefits to bring in even more people.
Treasury Secretary Scott Bessent has gone so far as to suggest the plan could eventually rival Social Security, comments that made some Republicans wince and that Bessent has since amended.
All of that underscores the big dreams for a plan that’s still in utero, and which some skeptics are already predicting could end up being a dud because of the limited benefits. Behind closed doors, Treasury is finalizing and preparing to release much-anticipated details about how the program will work.
Set to begin next year, it will allow family members, employers, state governments, nonprofits and philanthropists to contribute to the accounts, generally up to $5,000 each year, with some exceptions. The money would be invested in index funds until the child turns 18, when they could begin withdrawing money for specified purposes like buying a house.
Lawmakers in both parties have debated similar initiatives for years, as a way to reduce the wealth gap. But it was a surprising addition to the Republican package, thanks in part to venture capitalist Brad Gerstner and his nonprofit advocacy group Invest America, which pressed lawmakers to include the provisions.
Democrats have offered similar proposals, though they don’t much like the Trump version, in part because they say it doesn’t do nearly enough for lower-income people. Some worry it will mostly be used by the wealthy.
“The so-called ‘Trump accounts’ are a missed opportunity that focused on Donald Trump’s vanity and giving Republicans a hollow talking point rather than truly helping young people,” said Rep. Don Beyer (D-Va.), a tax writer who has authored a competing plan.
“I am willing to work with members of both parties to make this policy workable, but doing so would require significant changes.”
The initiative comes as the stock market is up by double digits for the third consecutive year, and as consumer surveys show that people who own equities are feeling much better about the economy than those who don’t.
Advocates’ designs for the program come in the face of some big questions over how many people will participate, especially among those who already have kids and don’t qualify for the $1,000 payments.
Unlike 529 education-savings plans, for example, contributions to Trump accounts are made post-tax, and distributions are taxed too. Not just that. Beneficiaries have to pay ordinary income tax rates on some earnings, which is worse than the capital gains’ treatment they’d get from simply opening a traditional brokerage account.
“I would expect fairly good take-up of the $1,000.” Said Greg Leiserson, a former top tax official in the Biden administration. “But I would expect very modest additional contributions on top of that.”
“The accounts are not that great” because “they’re trying to do this on the cheap,” he said. “There’s very little in the way of tax benefits.”
Naming the accounts after Trump may also limit their appeal to Democrats and independents.
And some are concerned about how the program will be implemented. Many are pushing Treasury to automatically enroll kids when they receive Social Security numbers. But Ray Boshara, a former Democratic aide who has worked with lawmakers on similar proposals, expects the department to instead have parents opt-in when they do their taxes — which could mean a lot fewer signups.
“We’re concerned about families who don’t have to file, families who need to file but don’t, families who do file but don’t do the form correctly,” said Boshara, now at the Aspen Institute. “They’re going to miss a lot of kids if you do it through a tax return.”
Some also wonder how many low-income people will participate because they don’t have extra income to put in the accounts, or don’t want to have money locked up until a child turns 18.
Meantime, the financial services industry is warning Treasury — which is looking to partner with the private sector to offer the plans — that if the agency only picks one company to help it run the program, other firms won’t have much incentive to sell it to the public.
And while companies like Uber, Dell and Charter Communications have said they intend to contribute to their employees’ accounts, and businesses may participate in order to curry favor with Trump, many are waiting and seeing.
Lira acknowledged the shortcomings and risks but said the program should be seen as a foot in the door — and hopes lawmakers will expand the break in coming years. Some see potential parallels to the history of the Child Tax Credit, which lawmakers have increased at least 10 times since it was created in 1997.
And it’s not hard to imagine Congress extending the $1,000 seed money pilot initiative beyond 2028. Democrats have a ready list of changes they’d make, including steering a lot more money to low-income kids. Sen. Cory Booker (D-N.J.) has a bill that would send up to $2,000 each year to the accounts, in addition to the seed money, depending on the family’s income.
“These accounts will evolve,” said Lira.
He stopped short of seconding Bessent’s suggestion this summer that the program could be a “backdoor for privatizing Social Security,” comments the Treasury chief revised to say it would be in addition to Social Security. (When children turn 18, the accounts automatically become retirement accounts).
“These accounts are about how you start your life — not how you finish it,” said Lira.
“We all know people who had a little extra help so they could buy a starter home, or they had a little bit of a cushion so they could take an unpaid internship that allowed them to do what they loved for their whole life, instead of what they had to do,” he added.
“The amount of money needed to provide people that freedom is not a lot of money and these accounts could potentially, if everything goes well, provide people with that sense of agency over their own lives.”