Author: Kaitlin Schaeffer Yardley, CFP®
Helping children develop strong financial habits early in life is one of the most valuable gifts a parent or guardian can provide. Recently, there has been growing discussion around new types of child-focused savings accounts, commonly referred to as “Trump Accounts.” Along with more traditional saving options, families now have more opportunities than ever to provide investment accounts for the next generation.
What Are 530A “Trump Accounts”?
Created under the One Big Beautiful Bill Act signed into law on July 4, 2025, 530A accounts are a new type of tax-advantaged savings vehicle designed specifically for children. These accounts aim to provide a financial headstart by encouraging early contributions and long-term, tax-deferred growth. An account may be established for any child before the year the child turns 18. While accounts cannot be funded until July 4, 2026, enrollment has already begun. Other details include:
- Annual Contribution Limit: Up to $5,000 per year, made by parents, grandparents or others. It is an irrevocable gift made to the child.
- Tax Treatment: Contributions are not tax-deductible; earnings grow tax-deferred and are taxed as ordinary income when withdrawn.
- Federal Seed Contribution: Children born between 2025–2028 may qualify for a one-time $1,000 government contribution (separate from annual limits).
- Employer Opportunity: Business owners may contribute up to $2,500 annually within the $5,000 cap and may deduct contributions if requirements are met.
Withdrawals are not permitted until the year the child turns 18, when the child becomes the legal owner and can access the funds. However, like retirement accounts, the funds may continue to grow tax-deferred for many years – benefiting from compound growth – and Required Minimum Distributions not occurring until later in life. Future contribution rules are expected to follow Traditional IRA limits, but it is essential to stay informed as Trump Account details continue to evolve.
While these new accounts are an exciting development, it is important for families to consider all savings options, including but not limited to:
- 529 Savings Plans: Ideal for education-focused savings with tax advantages for qualified expenses.
- Roth IRAs for Kids: Provides long-term growth for children with earned income.
- Custodial Accounts (UTMA/UGMA): Offers flexibility for a wide range of uses.
Each option serves a unique purpose and combining them can help balance flexibility, tax efficiency, and long-term growth. Regardless of the account type, starting early is key. Even modest, consistent contributions can grow significantly over time. Have a new baby you want to start saving for college? A $100/monthly contribution for 5-years, earning 5%, is about $7,000. If you keep it going for 15-years, you can save almost $27,000. Just as importantly, involving children in the saving process helps build financial knowledge and lifelong money management skills. Be sure to have open and realistic conversations about how much you and the child can afford, before the acceptance letters come in.
Kaitlin Yardley, CFP®, is the Chief Compliance Officer for Schaeffer Financial, LLC, a financial planning consulting firm located in suburban Washington, D.C. She has been advising clients for over 10 years and has been teaching for the National Institute of Transition Planning since 2017. Kaitlin is a member of the Financial Planning Association in Houston, Texas.
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