The US government launched the new Trump Accounts initiative, aimed at helping build long-term financial security for children, but will the accounts deliver on their promise?
Trump Accounts are tax-advantaged investment accounts available to all US children under the age of 18 with a valid Social Security Number. Children born between 2025 and 2028 will also receive a one-time $1,000 government seed contribution. Families, friends and employers can contribute up to a maximum of $5,000 per year per child and the funds will all be deployed into a diversified investment vehicle aimed at maximising long-term growth while minimising risk. Once the child turns 18, they gain full control of the account to manage and use the funds.
A mobile app was released by the US Department of the Treasury to allow account holders to monitor the account balance, track projected growth and deposit funds. The app also allows parents to add each of their children’s accounts to a single app to ease management.
Jurgen Vandenbroucke, managing director at everyoneINVESTED, is very positive about the potential of the new investment accounts. He said, “The single most important takeaway is not the brand name, nor the precise tax engineering, but the behavioural signal: start early, stay invested, and allow time to do the heavy lifting.”
The benefits of compounding, in Vandenbroucke’s opinion, is typically explained too late. However, the fact that these accounts are opened at birth or in childhood helps to make the long-term nature of investing tangible for families.
He added, “In that sense, Trump Accounts resemble the proposal associated with Friedrich Merz in Germany to create state-supported investment accounts for children, with monthly public contributions invested over time. Both ideas recognise a simple but powerful point: if society wants citizens to participate in wealth creation, it should not wait until they are middle-aged to invite them into the capital market.”
Fredrik Davéus, CEO and co-founder of Kidbrooke, also welcomed the Trump Accounts, noting it as a “significant piece of policy.” For the wealth management sector, he added, the initiative will do two things. First, it creates a large cohort of new, long-horizon accounts, and second, it draws a generation into investing much earlier than before.
“The commercial opportunity is real, and so is the servicing challenge that comes with it. These are small balances held for a very long time, which only works economically if the cost to serve is genuinely low.
“That points firmly towards scalable, digital, largely automated advice and guidance. Firms that can serve a million modest accounts profitably will do well from this. Those built around high-touch, high-minimum models will find it much harder.”
Closing the financial literacy gap
Getting families more involved in investing could also have another benefit, reducing the financial literacy gap. A 2024 joint report from the TIAA Institute and GFLEC into financial literacy highlighted a notable knowledge gap within the US. It claimed that US adults only answered 48% of the 28 personal finance questions correctly.
Trump Accounts will provide children from an early age with experience in seeing how investing works and the benefits it can bring. It is not just for the child, but families previously not actively engaged with investing could start to gain more experience.
Davéus noted that the ability to close the financial literacy gap is the most interesting aspect of these new accounts. “An account in a child’s name, funded from birth, is a powerful teaching device. It gives families a concrete reason to talk about compounding, risk and long-term saving, and it does so with real money rather than a hypothetical example. “
However, whether this makes a difference depends on how the experience is supported. He added, “A balance sitting in an app that nobody understands teaches nothing at all. An account that explains what is happening to the money, why it moves and what contributing a little more would do over eighteen years can shape lifelong habits. The literacy gain though must be designed in, and that is a job for the technology and the guidance layer.”
Vandenbroucke is also optimistic about the ability for the new accounts to boost financial literacy. He noted that financial education is often taught in abstract terms. While children might be taught about risk, return and diversification, they typically do not see these concepts in action or understand how they would affect them personally. This limits the effectiveness of such education programs. However, Trump Accounts help turn that education into lived experience.
He also pointed to the substantial number of adults with available funds who do not currently invest. For instance, the Dutch Authority for the Financial Markets recently noted that around 800,000 Dutch households have sufficient financial resources to invest but don’t. A similar picture is likely to exist in the US. A recent CivicScience survey claims that 26% of US adults want to start investing but do not know how to.
Vandenbroucke said, “This is exactly the terrain of household finance, the field defined by John Campbell from Harvard University in his 2006 presidential address to the American Finance Association and published in the Journal of Finance. Campbell argued that the welfare benefits of financial markets depend on how effectively households use them, and that poorer and less educated households are more likely to make costly financial mistakes or avoid financial strategies they do not feel qualified to use. That point is central. Trump Accounts can help narrow participation gaps, but they will not, on their own, close the wealth gap.”
By improving financial education for children, the knowledge gap will slowly shrink.
While the accounts might help to reduce the knowledge gap, they are unlikely to reduce the wealth gap and could even widen it. Davéus noted that while these accounts help at the margin and the universal seed is a progressive feature that can help all children, regardless of family wealth, the benefit of the accounts compounds with contributions.
He said, “The difficulty is that the benefit compounds with contributions, and the families most able to add $5,000 a year are the ones who already have means. Without something to close that contribution gap, the accounts risk widening the very divide they are meant to narrow, simply from a higher base. So they are a useful foundation rather than a solution in themselves. Matched contributions for lower-income families, financial education and access to good guidance would all need to sit alongside them for the wealth-gap ambition to be met.”
The accounts are a boon for families, but simply allowing the seed contribution to enter the account and then forgetting about it will not realise their full potential. Davéus said the most important takeaway from the launch of the accounts is that “access on its own is not the same thing as outcomes.”
He continued, “Opening an account and seeding it is the easy part. Turning that into financial security and financial understanding depends on everything that follows: the contributions, the investment choices and, above all, whether people actually comprehend what they hold. The clear message for our industry is that value now shifts from distribution to engagement and explanation.”
In closing, Vandenbroucke is cautiously optimistic for the Trump Accounts. He said, “Trump Accounts are not a complete wealth policy, and they should not be presented as such. But they are a potentially powerful participation policy. They make the idea of long-term investing concrete, personal and intergenerational.
“They align with the direction of policy travel in Europe and the UK: lowering barriers, improving support, and helping households put appropriate surplus savings to work.”
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