In 2025, Congress approved “Trump Accounts,” which are IRA-type investment vehicles for minors. An important feature of Trump Accounts is that there is no income requirement to contribute.[i]
While children born in 2025-2028 will get a $1,000 investment from the government, perhaps the main positive effect of Trump Accounts is to increase awareness around early saving and investing.
Assuming a 7 percent average annual return, you can expect a $1,000 investment for a 1-year-old to grow to over $85,000 by the time the child is 65.
In my experience, families determined to give their children a financial head start will do so. They choose among the investment vehicles available to help them reach their goals.
Below, I will briefly describe three other account types our clients use.
College savings accounts
The most popular type of college savings plan is the 529 account. Usually opened by parents or grandparents, 529s have large lifetime contribution limits–$500,000 per beneficiary in Texas–and, if funds go unused, the account owner can convert at least part of the balance into a Roth IRA for the beneficiary, or change the beneficiary.
While still available, fewer families choose Coverdell Education Savings Accounts, which have lower contribution limits.
Retirement accounts
Trump Accounts remove the income requirement, but families can already open a retirement account for their child. A common choice would be a Roth IRA funded with household chore income (the parents serve as the employer) or summer job money for older kids.
A traditional employer will report wages to the IRS via form W-2, but if your child works for you as a household employee, you must keep a wage and income log.
Regular investment accounts
The least restrictive option is a “gift to minors” investment account. As with a retirement account, the child takes over the management of the assets in young adulthood. However, unlike a retirement or college fund, the money does not have age or use penalties.
A simple example of a “gift to minors” investment is when a grandparent wants to buy shares of a favorite stock for their grandchild. Acting as custodian, the grandparent opens the account in the child's name and buys the shares.
What really matters
Regardless of the amount invested, helping the young people in your life get started with saving and investing offers them a powerful advantage. Opening their eyes to the wonders of compound interest and the time value of money is a high-return investment.
This short article is meant to be a conversation starter, not a comprehensive guide to the best choice for your family. That’s for an individualized discussion between you, your financial planner, and your tax preparer.
Please let me know if you have any questions!
John R. Berry started Corner Post Financial Planning 20 years ago this spring.
[i] Like all investment accounts, Trump Accounts must be opened by an eligible person. The government will not do this for you. For more information, visit https://form.trumpaccounts.gov.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
TrumpAccounts offer tax‑deferred growth on earnings and provide tax‑free withdrawals when distributions are qualified. Contributions may include after‑tax family contributions, pre‑tax employer contributions, and a one‑time $1,000 federal contribution for eligible children born between 2025 and 2028. Withdrawals prior to age 59½ may result in a 10% IRS penalty tax, in addition to current income tax, and may be restricted until the child reaches age 18. Annual contribution limits and other restrictions apply. Some TrumpAccount rules and regulations are still forthcoming from the U.S. Treasury and IRS. Clients should consult with a qualified tax advisor or financial professional before making any decisions.
Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.