Congress may soon deliver a little bundle of joy to expecting parents and parents-to-be. The House-passed “One Big, Beautiful Bill Act” contains the seed of a new federal investment program that may blossom into opportunity and financial security for millions of American children in the future. Fiscal conservatives have reasons to get on board.
President Trump has formally introduced his plan for the federal government to fund $1,000 in investment accounts for every child born over the next four years. The cash would be deposited into a private custodial account and grow tax-free until he or she reaches adulthood.
Parents, churches, charities and employers can also contribute up to $5,000 a year to the account. At age 18, the young adult gains access to half of the funds to be used for college or skills training, to start a business, or even for a down payment on a home.
Trump Accounts are a marked improvement from the baby bonuses floated last year. Most fundamentally, Trump Accounts reflect a shift in the purpose and outcomes of family-supporting policies. The downstream effects will be minor on the budget but major for the economy and society, such that these accounts should earn broad conservative support.
This plan promotes saving as a virtue that every American can adopt from birth. Different from the yeoman’s goal of turning around our declining birth rate, these investment accounts are future-focused. Trump Accounts would democratize investing through its inclusivity. Open to every U.S.-born child with parents who have Social Security numbers with work authorization, children of all income levels and stripes would have skin in the investment game.
While about two out of three Americans currently own stock and retirement accounts, according to Gallup polling, they tend to be degree holders and higher earners. Only 38 percent of Hispanics, 52 percent of Blacks and 28 percent of those earning below $50,000 participate in the stock market. Trump Accounts would skyrocket market participation.
Young Americans would also gain a lesson in financial stewardship. In a culture that thrives on living for the moment, a generation of children would reap the benefits of patience and delayed gratification.
Many parents would rather a one-time $5,000 check or a tax refund bump. However, families are well cared for in Trump’s big, beautiful bill. Lowered income tax rates are made permanent, and the doubled Child Tax Credit increased by $500 for the next few years. Additionally, 529 plans are expanded significantly to cover more out-of-pocket K-12 costs, on-the-job training and continuing education.
Trump Accounts would complement 529 plans. Children from poor and working-class backgrounds with little means to invest in 529s would gain access to a government-funded seed account. Brad Gerstner of Invest America posited that, with just $750 of additional savings per year, these accounts would swell to $50,000 by age 18.
By focusing on saving for the future, Trump Accounts blunt inflationary fears and shrink fiscal impacts. Vice President JD Vance proposed a $5,000 baby bonus as a candidate, which Trump supported. Based on the most recent data from the National Center for Health Statistics, there were about 3.6 million births in 2023. A $5,000 baby bonus would have cost roughly $18 billion a year, whereas Trump Accounts are not likely to exceed $3 billion annually. These accounts are also time-limited, from Jan. 1, 2025, to Jan. 1, 2029, although the accounts may be renewed.
I sympathize with supporters of baby bonuses as a policy solution to reversing our declining fertility rates. Demographic changes of fewer babies and longer life expectancies are stressing our Social Security system. However, baby bonuses have been tried in other countries with mixed results at best.
A few thousand dollars is not enough to lure willing adults to procreate. The cost of raising a child from birth to age 17 on average is about $297,000. Children are costly. I know; I have three of them. From cribs to diapers, prenatal vitamins to formula, and child care to sports teams, our expenses compound daily.
I view Trump Accounts as a solution to a different problem: the affordability crisis. Young people feel priced out of generational milestones such as homeownership. Turning age 18 with meaningful savings would help younger people break into the housing market sooner.
The funds could also serve as the capital to spur a new generation of entrepreneurs. When traditional bank loans are not an option for young or risky borrowers, funds from these Trump accounts could purchase tools and equipment, a vehicle, or supplies to get started with one’s own endeavor. These future property owners and business owners will pay it forward through the fruits of their ingenuity and hard work.
Some sort of family-supporting policy was guaranteed to be part of the big, beautiful bill. Investment accounts that spread the virtue of saving, democratize investing and promise future economic growth are a generational hand up. That is far better than a handout wrapped up in swaddling clothes.
Patrice Onwuka is the director of Independent Women’s Center for Economic Opportunity.
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