Trump-backed savings app for children launches soon: All you need to know

A new application will be available on May 28, which is the Trump accounts. This will allow parents to track the IRA-style savings accounts for children. These are “historic new savings accounts” created under the “one big beautiful bill”. The White House made the announcement on Wednesday. In a social media post on the platform X, White House said that the account will allow people to “Manage everything. Watch the growth. All in ONE place.” The app, which has been built by Bank of New York Mellon (BNY) and Robinhood Markets Inc. (HOOD), will be available on the Apple Store and Google App Store.

What are the Trump accounts?

The Trump accounts app is a way for users to register for Trump accounts. Trump accounts are a unique hybrid of IRA and private savings account. This allows individuals, such as parents, guardians and other authorised figures to establish a new type of savings account for the children who are under the age of 18. These accounts are deferred from tax and will feature a contribution of $1000 for children born between Jan 1, 2025, and Dec 31, 2028, with valid social security numbers. Parents can manage a retirement-style savings account, maxing out to $5000 per child. The initiative is heavily supplemented by private endowments, notably a $6.25 billion donation from Dell Technologies CEO Michael Dell and his wife, Susan.

The accounts will officially launch on July 4. Interestingly, every dollar, including the pilot federal fund, seed funding and parents' investment, will be automatically invested in an S&P 500 index exchange-traded fund (ETF). The program is for low-middle-income parents, and account holders will also be provided with Financial literacy material.

According to the US Treasury, the $1,000 alone could grow to roughly $5,800 by age 18 and nearly $200,000 by age 55 without additional contributions. The account manager will have no say on selecting individual stocks, sectors, or custom investments. This setup is designed for a long-term hands-off investment strategy to maximise the child's future retirement.

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Problems with Trump accounts

The White House frames the Trump accounts as giving every newborn child a head start. But there are major criticisms of the Trump accounts. In December, US Treasury Secretary Scott Besent said that this could be a replacement for the government-funded retirement benefits. Critics pointed out that it was a backdoor to “privatising the social security”. While some have called this “well-intentioned”, others have called this another strategy to draw wealth from lower and middle-income parents to the ultra-rich. Defaulting public funds into Wall Street Indexes boosts the profits of corporate shareholders. The Tax Foundation said that it “adds another layer to an already overcomplicated savings account system”. Many lower-middle-income parents will lack the funds to max out the private $5000 deposit limit to access the maximum tax advantage. Meaning the maximum tax advantage will favour wealthier families who will be able to invest the maximum $5000 each year. Critics argued that this hardly levels the playing field, instead tilting it in favour of those who already have the means.