This week, at the White House, tech CEO Michael Dell and his wife, Susan, committed a $6.25 billion gift to support a key presidential initiative: a new tax-advantaged savings mechanism termed the “Trump Account.” This program establishes an investment account for every newborn, initiated with a $1,000 federal deposit, with the stated aim of empowering all Americans to commence building assets from birth.
The superficial attractiveness of Trump Accounts is evident. Following several months of federal policies that have placed strain on working families—ranging from stricter SNAP eligibility rules to increased health-care premiums—any initiative designed to assist parents in saving for their children represents a welcome change. Furthermore, the core principle behind the program is sound: well-structured, automated savings can positively influence family behavior. A study of Oklahoma’s SEED OK experiment revealed that newborns randomly assigned to receive $1,000 in a 529 College Savings Plan led their parents to report higher educational expectations for their children and increased engagement in long-term financial planning. While Trump Accounts are not exclusively intended for education, this research provides optimism that thoughtfully designed savings policies can reshape how families plan for their children’s future.
However, despite the White House framing the Trump Accounts as a method to “give every newborn child a head start toward lifelong financial security and the American Dream,” the reality is considerably less equitable. Although the program is accessible to all children, its benefits will primarily flow to families who possess the financial capacity to contribute thousands of dollars annually. What could have served as a tool for leveling the playing field instead risks becoming a deepening divide between the affluent and the less fortunate.
You need not rely solely on our assessment; the White House’s own data clearly illustrates this point. In its analysis, the Council of Economic Advisers projected the growth of a child’s account under various contribution scenarios. For a family living paycheck-to-paycheck, unable to add anything beyond the government’s initial $1,000 seed deposit, the balance would reach merely $5,839 by age 18. While better than nothing, this amount is hardly transformative.
For wealthier families, the outlook is entirely different. Those able to make the maximum inflation-adjusted contributions of $5,000 per year will witness the same account expand to $303,757 by age 18. This scenario presents two children, two seemingly identical programs, and two remarkably divergent financial futures.
And the disparities do not end there. Because Trump Accounts are structured akin to tax-advantaged retirement plans, families who contribute the most also receive the largest tax benefits. A child whose family cannot save beyond the initial $1,000 experiences only modest tax advantages by age 18. In contrast, a child whose parents can make the maximum contributions receives tax relief on a vastly different scale. In essence: the greater the parents’ wealth, the larger the tax subsidy they receive.
Yet, this outcome is not unavoidable. We already possess models for fostering children’s assets in ways that diminish rather than exacerbate inequalities—approaches designed to provide children without inherited wealth the initial financial footing that some savings can offer.
The fundamental concept of the Trump Accounts bears resemblance to a prior proposal from Senator Cory Booker, known as “Baby Bonds.” That plan would also grant every child a $1,000 deposit at birth, but would supplement this with up to $2,000 per year in federal contributions, with the largest sums allocated to the lowest-income families. By the time these children reached adulthood, they would possess a substantial nest egg to allocate toward education or purchasing their first home. The plan’s architects estimated it could generate an account balance of $46,215 for the nation’s poorest 18-year-olds, significantly more than what the Trump Accounts would provide. It operates on the same premise—building assets early—but would aim to equalize opportunities rather than further skew them.
The Trump Accounts, in their current form, do not fulfill any significant promise of creating a level playing field. The only element targeted by income does not originate from the federal design but from private charitable giving. The Dells’ donation will be directed toward children residing in ZIP codes with median household incomes below $150,000—a deliberate effort to concentrate resources where they can yield the greatest benefit. Their contribution emphasizes a straightforward point: when support is aimed at families with the least resources, its impact is considerably greater.
However, while these accounts are far from perfect, they do represent a beginning. Both political parties are now engaging in more serious discussions about assisting the next generation in accumulating wealth, and there is broad public consensus that every young person should commence adulthood with some savings. To truly level the playing field for the next generation, low-income families who lack the disposable income to invest should be provided with more upfront seed funding and sustained support over time.
The guiding principle is this: A children’s savings program should uplift those who lack a financial head start, rather than reinforcing existing advantages. And if we implement this correctly, the next generation—regardless of their circumstances—will enter adulthood with a solid foundation for a more prosperous economic future.
