New Savings Plan for Kids: What You Should Know

A new savings initiative, "Trump Accounts", has been introduced to help families save for their children's future.

Key Features

• Government Contribution: $1,000 for each child born between 2025 and 2028.
• Family Contributions: Up to $5,000 annually.
• Employer Contributions: Up to $2,500 annually.
• Investment Requirement: Funds must be invested in a low-cost stock fund.

Eligibility

• The child must be a U.S. citizen.
• Both parents must have Social Security numbers.
• Accounts can be opened using a new IRS form.
• The Treasury Department will assist with the process starting May 2026.

Dell Foundation Donation

• Michael and Susan Dell have donated $6.25 billion to expand the program.
• $250 will be given to children aged 10 and under born before 2025.
• Targets children in areas with a median income below $150,000.
• Aims to reach 25 million children.

Usage and Tax Benefits

• Funds can be used for higher education, buying a home, or starting a business.
• Withdrawals are only allowed when the child turns 18.
• Taxes on growth are deferred until withdrawal.

Pros and Cons

• Supporters: Praise the simplicity and universal financial boost.
• Critics: Argue it lacks targeting, benefits all children regardless of need, and adds complexity to existing savings options like 529 accounts, which offer more flexibility and tax benefits.