On July 4, parents across the United States will be able to start contributing to a Trump Account, a new type of investment account designed for long-term wealth-building. The accounts have attracted a wave of interest from eligible families who want to claim the $1,000 government contribution for children born between 2025 and 2028.

Comparing Trump Accounts to Other Savings Plans

Financial experts say that the key to choosing the right account is to define the purpose of the money. Timothy McGrath, a certified financial planner, notes that parents need to ask themselves what their objective is. For example, a 529 plan can offer unmatched tax advantages for education savings, while a custodial brokerage account gives greater flexibility to use funds for major milestones, like a first home or general financial support.

Trump Accounts are designed as custodial investment vehicles for long-term wealth-building, with limited investment options and a prohibition on withdrawals in all but one instance before a child turns 18. Unlike a custodial Roth IRA, families may contribute to Trump Accounts even if the child doesn’t earn income. Parents, relatives, friends, and employers may, combined, contribute up to $5,000 per year, which can accelerate a child’s savings long before they start working.

Considering the Limitations of Trump Accounts

While Trump Accounts can serve multiple purposes, they are often not the most efficient option for any one purpose. Accounts designed for a specific goal, such as 529 plans for education or Roth IRAs for retirement, can typically offer stronger tax advantages or greater flexibility tailored to that purpose. For families focused on helping their child or general financial support, custodial brokerage accounts may provide more flexibility, allowing funds to be used for any purpose that benefits the child with no contribution limits — though with fewer tax advantages than Trump Accounts.

Original reporting: KEYT (Ventura/Santa Barbara) — read the source article.