Zacks Investment Management

Kristin P. from Macon, GA asks: Hello Mitch, I’ve got two young kids with one on the way, and so I’m very interested in the investment accounts for kids that I understand is in the “Big, Beautiful Bill.” Can you provide some detail and clarity as to how they work, how to access them, etc.? Thank you.

Mitch’s Response:

You are correct – inside the version of the Big Beautiful Bill that has passed the House, there is a new federal proposal known as “Trump accounts,” which creates a new category of investment accounts for young kids.

If the policy passes in its current form, there are several takeaways to note:

• Parents of children under the age of eight would be allowed to open one of these accounts starting January 1, 2026.
• Your newborn would benefit even more. The initiative would also have the U.S. automatically contributing $1,000 to accounts for all babies born between January 1, 2025, and December 31, 2028. For families who haven’t taken the step of opening an account themselves, the U.S. Treasury would be responsible for establishing one on the child’s behalf, ensuring widespread access regardless of income or financial awareness.
• Once opened, these accounts would allow up to $5,000 in contributions per year from parents, family members, employers, or others (with the annual cap adjusted over time to keep up with inflation).
• Investment options would be limited to U.S. stock-market index funds or other diversified portfolios composed of domestic equities, to keep the structure simple, low-cost, and broadly growth-oriented.
• And finally, and this is the big one, earnings in the account would grow tax-deferred, and when the funds are withdrawn—presumably for life milestones like education, home purchases, or even retirement—they would be taxed at long-term capital gains rates, rather than as ordinary income.

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Now, it’s important to note that this initiative is still in the proposal stage, and the Senate still needs to take up the House bill. Which is to say, don’t consider this a done deal until it is signed into law.

But if we assume for a moment that this provision does become law, I think it could have substantial implications for wealth building of younger generations. There’s also a perhaps less appreciated but arguably just as important benefit: financial education. If implemented, these accounts would not just allow parents to start investing for their children on a tax-advantaged basis early, it would allow for early exposure to investing and financial markets. Indeed, the very act of growing up with an investment account could serve as a hands-on lesson in how markets work. Kids might learn the magic of compound growth by seeing it in action, understand the value of long-term investing, and begin to grasp concepts like risk and reward earlier than previous generations.²

In that sense, the real power of these accounts might be less about the dollar amount and more about what they teach. If a new generation of Americans comes of age with even a basic understanding of investing, it could raise the floor of financial literacy across the board. That alone might be the most meaningful return on the government’s investment.

These proposed accounts offer new opportunities, but it’s important to stay prepared for whatever comes next in your financial journey.

If you’re looking for straightforward advice on how to protect your savings from life’s uncertainties, I recommend our guide, Retirement Uncertainties… and How to Breeze Through Them³. This guide will help you potentially guard your retirement assets against the “what ifs” in life, including:

• Ideas to allocate your assets to defend against a correction or crash
• Strategies to deal with financial emergencies without liquidating investments
• Tax planning ideas to help avoid unpleasant surprises
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