A new proposal in the House budget, known as the Invest America Act, would create a government-seeded “Trump Savings Account” for children born between 2025 and 2028. Touted as a tool for long-term financial security and mobility, the plan is gaining traction, but also drawing concerns over its potential to deepen the wealth divide.
What the Plan Offers
The Trump Savings Account is designed to help children build wealth from birth. Each eligible child would receive a $1,000 seed investment funded by the federal government. Families, friends, or even businesses could then contribute up to $5,000 annually into the account. The funds would be invested in a low-cost index fund that tracks the S&P 500, growing tax-deferred until the child turns 18. Withdrawals after that age would be taxed at the capital gains rate. At its launch, Trump called it “a pro-family initiative that will help millions of Americans harness the strength of our economy to lift up the next generation.”
Backed by Growth Projections
The plan’s backers emphasize the potential of compounding interest. Brad Gerstner, CEO of Altimeter Capital and a co-creator of the proposal, estimated the account could grow dramatically over time, assuming steady contributions:
- $50,000 by age 18
- $175,000 by age 30
- $1 million by age 50
While these numbers couldn’t be independently verified, Trump stressed the plan’s social impact. “Children with savings accounts are more likely to graduate high school and college, buy a home, start a business, and are less likely to be incarcerated,” he said.
Different from 529 Plans
Though it sounds similar to existing 529 education savings accounts, the Trump Savings Account offers greater flexibility. Unlike 529s, limited to education-related expenses, Trump Accounts could be used for a wider range of goals, including buying a home or starting a business. The funds would be privately held, not managed by states like 529s. 529 plans have seen massive growth in recent years, with participation rising from 4.2 million accounts in 2003 to over 16.8 million today. The average balance now exceeds $30,000, but they remain education-specific.
A Path to Homeownership
The Trump Account could make it easier for future generations to afford down payments. In 2024, the median down payment for first-time buyers was $37,521 or 9% of the median home price, according to the National Association of Realtors®. “Down payment savings, or the lack thereof, can be a major difference maker for many households,” said Danielle Hale, chief economist at Realtor.com®. “Having funds can mean getting into your own home years sooner.” However, Hale warned that these savings might also have unintended market effects. “An influx of savings like what we might see from these accounts… would likely push prices higher.”
Uneven Benefits Predicted
The proposal’s success heavily relies on families being able to contribute over time. Critics argue that wealthier households are much more likely to do so, giving their children an even greater financial advantage. “The savings accumulation will be even more powerful if individuals continue to contribute beyond the initial $1,000 seed funding from the federal government,” Hale noted. However, many American families may not be able to make regular contributions. According to the Urban Institute, the bottom 80% of households hold only half the liquid wealth of the top 20%, and are more vulnerable to financial instability.
Risk of Widening the Gap
Critics argue that without broader financial reform, the Trump Administration could widen the wealth gap. Families facing job instability or emergency expenses might find the account less practical, especially given that early withdrawals before age 18 come with a 10% penalty. That limitation could make traditional savings options more appealing to lower-income households. Still, the projected $5,000 from the government-funded seed alone—assuming no additional contributions—could be meaningful when combined with other support like down payment assistance.
Still, a Starting Point
Despite its limitations, advocates say the Trump Savings Account could provide future generations with a valuable foundation. The flexibility to use the funds for homeownership, business, or education after age 18 offers promise, especially in today’s economy. Trump called the initiative “a big jump on life,” adding, “especially if we get a little bit lucky with some of the numbers.” The long-term hope is that such accounts could offer children a more secure financial future, even if outcomes vary based on family wealth.
