What are the Trump Accounts for kids and how do they work?

Among the many provisions introduced by President Trump's signature legislation, the One Big Beautiful Bill Act, is the launch of a new type of account designed for kids. Known as "Trump Accounts," these are tax-advantaged investment accounts that parents will soon be able to open on their child's behalf to start saving and investing. As an added bonus, kids who meet certain requirements will receive a free $1,000 from the federal government to seed the account.

Though the account offers advantages — particularly for those eligible for the free money — the Trump Account also has some limitations that might mean it is not necessarily a better option than, or replacement for, existing accounts.

What are Trump Accounts?

The Trump Account is a "special trust designed to give children a head start financially," said NerdWallet. Parents, among others, can contribute up to $5,000 annually until the child turns 18, which is then invested in the stock market — specifically, a "diversified fund that tracks a U.S. stock index," said CNBC Make It. A parent's employer can also contribute up to $2,500 a year to the account, and it will not count as taxable income. But because contributions are made with after-tax dollars, there is no tax deduction.

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Account holders can access the funds once they reach the age of 18. At that point, the "accounts are treated much like a traditional IRA," wherein the "money grows tax-deferred" and "withdrawals are taxed as regular income, plus a 10% penalty if you take the money out before age 59½," said CNBC Make It.

There are some exceptions, though, including penalty-free withdrawals for "higher education expenses, or for those that come as a result of disability, domestic abuse or a natural disaster," said the CNBC Make It. There is also a "$10,000 exception for new home purchases, and $5,000 can go toward a baby of their own."

Who is eligible?

Technically, any parent can open a Trump Account for their child. But only children born after Dec. 31, 2024, and before Jan. 1, 2029, who are U.S. citizens and have a Social Security number, are eligible to receive the one-time government contribution of $1,000.

The accounts are "expected to become available next July," said The New York Times. However, "details of how the accounts will be opened and funded remain to be seen," said the Times, citing Tom O'Saben, the director of tax content and government relations at the National Association of Tax Professionals.

Is it worth it?

"If your child qualifies for the $1,000 gift from Uncle Sam, you should at a bare minimum open an account to take advantage of it," said Kiplinger. That said, "existing accounts may offer more attractive tax benefits, depending on your goals," said CNBC Make It.

For instance, "brokerage accounts, including UTMA & UGMA custodial accounts, don't have contribution or withdrawal limits," said NerdWallet. And if you are saving for college, a "529 plan offers more flexibility than a Trump Account when it comes to who can open an account and use the money."