Yahoo Finance explains how Trump Accounts for children work

What Trump Accounts are

Yahoo Finance reports that Trump Accounts are a new tax-advantaged investment account for children created under a provision of the One Big Beautiful Bill Act. The article says the accounts are meant to give children an early start on saving and investing. It says anyone under 18 with a valid Social Security number may qualify.

The report says the Treasury Department announced on Oct. 1 that automatic enrollment had been completed for 60 million eligible children. Even so, parents or legal guardians still have to activate the account through trumpaccounts.gov or the mobile app.

Who can get the account and the starter money

According to Yahoo Finance, Trump Accounts are available for children 17 and younger, and children must not turn 18 before the end of the calendar year to remain eligible. The article says the accounts were created in Trump's 2025 tax bill.

The report says the U.S. government will make a one-time $1,000 contribution for U.S. citizens born between Jan. 1, 2025, and Dec. 31, 2028, as long as they have valid Social Security numbers. It also says children under 10 in lower-income areas may qualify for a $250 contribution. Yahoo Finance adds that children can receive only one of those gifts.

How the accounts can be funded

Yahoo Finance says family members, friends, employers, organizations and the federal government can all add money to a child’s Trump Account. The article says family and friends can contribute up to $5,000 a year per child, and those contributions are not tax deductible.

The report says employers can contribute up to $2,500 per year per employee, and that amount counts toward the $5,000 annual cap. It also says those employer contributions are not treated as taxable income for the employee. Contributions from the government and nonprofit organizations do not count toward the annual limit, according to the article.

The report says children born during the qualifying 2025-2028 period will receive the $1,000 government deposit if they are U.S. citizens with valid Social Security numbers. It also says children under 10 in certain ZIP codes, generally those with median household incomes below $150,000, can receive a $250 deposit funded by a $6.25 billion gift from the Michael & Susan Dell Foundation.

When the money can be used

According to Yahoo Finance, a child cannot access the money until age 18. At that point, the account can be converted to an IRA or kept in the same form. The article says that if the money stays in the account, the child may use it for education, a business or a home down payment.

The report says once the account is treated like an IRA, IRA withdrawal rules apply, including a 10% penalty for withdrawals before age 59½. It also says there are penalty-free exceptions for first-time home purchases, higher education and some medical costs. The article notes that children who are disabled may be able to access the money at 17.

Reasons to open one and reasons some families may not

Yahoo Finance says the new IRS rules mean eligible children are automatically enrolled, but the account still must be activated. The article argues that families should consider activating it if a child qualifies for free money, especially the $1,000 contribution for babies.

The report says the Trump Account website projects that an initial $1,000 deposit could grow to $6,000 by age 18 if no additional money is added, based on historical S&P 500 performance. It also says employer contributions could make opening the account more appealing because those contributions are free money and do not count as regular income.

At the same time, Yahoo Finance says families are not required to create the account. The article says the appeal is more limited for children who do not qualify for a government or other free contribution. It notes that the money is locked up until age 18, unlike a high-yield savings account, and that the account is more restrictive than a 529 plan for early education use.

The report also says a 529 plan may offer more flexibility for many families because some plans now allow spending on private K-12 tuition, apprenticeships and certifications. Yahoo Finance adds that if a family is not already maximizing its own retirement accounts, that may be a higher priority.

How to activate the account and alternatives

Yahoo Finance says parents or guardians can activate a Trump Account by going to trumpaccounts.gov or using the official mobile app. The article says they will need to verify identity, confirm the relationship to the child, check the information and accept the terms.

The report says families seeking the $1,000 pilot contribution must file IRS Form 4547 and request the contribution through the app. It adds that even families who do not qualify for a current contribution may still open the account so later employer-funded deposits can be easier to receive.

The article also lists alternatives, including a high-yield savings account for emergency savings, a kid-focused money app for budgeting and basic investing lessons, and a custodial Roth IRA for a child with earned income. It says these options may offer more control or flexibility than a Trump Account.