Your child’s $1,000 “Trump account” that could reach 6 figures. Here’s a strategy to keep it tax-free

If you have a baby between 2025 and 2028, your little one could come home with a $1,000 advance from the government.

That’s the whole idea behind the new “Trump Accounts,” introduced as part of the One Big Beautiful Bill signed by President Trump in July 2025. These accounts are intended to help families build long-term financial stability by giving children an early foothold in future investment growth.

The one-time payments are meant to be a savings vehicle that parents can save for their children who have a Social Security number. If parents maximize their contributions and the funds remain intact, by the time the child is 18, the White House Council of Economic Advisers estimates the account could be six figures.

So how do these Trump accounts work?

According to the One Big Beautiful Bill, babies born between 2025 and 2028 can be registered for a $1,000 Trump account from the government (1). Parents can add up to $5,000 a year, and all of that money is invested in U.S. stock index funds, such as the S&P 500.

According to projections from the White House Council of Economic Advisers, a baby born in 2026 whose parents contribute the maximum could earn $303,800 at age 18 and $1.09 million at age 28, assuming average market returns. If the parents do not make additional contributions, the account still reaches $5,800 at age 18 and $18,100 at age 28.

When the child turns 18, the Trump account converts into a traditional IRA, meaning taxes are withheld when the money is withdrawn.

There is a potential workaround: a Roth IRA conversion. If done correctly, all future withdrawals could be completely tax-free after age 59.5. Normally, Roth conversions trigger taxes, but if the converted amount falls below the 0% income tax bracket (about $11,925), the tax impact could be zero. However, families should note that the IRS has not officially confirmed whether Roth conversions would be allowed for Trump accounts (2).

Read more: Are you richer than you think? 5 Clear Signs You’re Hitting Well Above the US Average

Although Trump accounts seem like a great way for families to give their children a head start, parents have several other strategies that can point their children in the right direction when it comes to saving money:

Roth IRA for children: If your child earns income from a part-time job, you can open a Roth IRA in their name. Contributions are made with after-tax dollars and the money grows tax-free for life. This can be a great way to teach children how to save and invest, and give them a head start on retirement (3).

529 education savings plans: These plans allow families to save for college with tax benefits. Contributions grow tax-free and withdrawals for qualified education expenses are tax-free. More than 30 states also offer income tax deductions or credits for 529 contributions. It is important to remember that only qualified education expenses count toward the withdrawal of tax-free benefits (4).

Regular brokerage accounts or deposit accounts: Are you looking for more flexibility? Consider custodial accounts (UGMA/UTMA) in a child’s name. There is no contribution limit, but taxes may apply on investment gains. This option could be a great way to save for goals like buying your first car (5).

Teaching financial literacy: Perhaps the most important strategy of all is to discuss money with your children; including paying bills, budgeting, investing and saving. Talk to your children early on about how to make wise decisions with their money and be wise financial role models for them (6).

Trump accounts are just one tool parents can use to help their children plan for a strong financial future. Add in smart tax measures, regular contributions, and financial education along the way, and you’re well on your way to helping your children develop a financial management playbook that can help them build their future.

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White House (1); Ed Slott and company (2); CNBC (3); Saving for college (4); Loyalty (5); FDIC (6)

This article provides information only and should not be considered advice. It is provided without warranty of any kind.