By Peter Reagan
A thousand dollars looks like a great deal in a maternity ward.
Eighteen years later, when that baby is preparing for college, looking for a first home or trying to build an adult life, the same thousand dollars may not look quite so substantial.
That does not make Trump Accounts a bad idea.
To the contrary, the federal government is offering eligible children a genuine financial head start. Families should understand the benefit and take it seriously.
They should also understand what the account can – and cannot – accomplish.
Because time gives money an opportunity to grow.
Inflation gets the same 18 years.
What Trump Accounts actually do
Trump Accounts are a new type of individual retirement account created for children. The IRS explains the program here.
An account may be established for an eligible child who has not turned 18 by the end of the calendar year in which the election is made and who has a valid Social Security number.
The federal government’s one-time $1,000 contribution has narrower eligibility requirements.
To receive that money, a child must:
- Be born from January 1, 2025, through December 31, 2028
- Be a U.S. citizen
- Have a valid Social Security number
- Have an eligible parent or guardian elect to establish the account
Parents can open Trump Accounts for older children, too. Those children simply will not qualify for the federal $1,000.
The Associated Press provides a useful overview. Parents, relatives, employers and other eligible contributors may add money to the account, subject to annual limits. Governments and charitable organizations can contribute under separate rules.
The account is managed by a private firm, and the money must remain in a narrow category of low-cost funds tracking broad U.S. market indexes during the child’s growth period.
With limited exceptions, the child cannot withdraw the money before the calendar year in which he or she turns 18.
After that point, the account generally follows the rules governing a traditional IRA.
That distinction matters.
The original draft said the money could be used only for approved purposes such as college or a home. That is not quite accurate.
Certain uses, including qualifying education expenses and a first-home purchase, may receive more favorable early-withdrawal treatment. But once the beneficiary reaches adulthood, the money is not permanently controlled by the government or restricted to only two approved purchases.
Taxes and early-withdrawal rules may still apply.
A $1,000 head start is worth having
Let me say something before the political arguments swallow the practical question:
Giving a newborn $1,000 and decades of potential compounding is a meaningful benefit.
Parents and grandparents spend years trying to give children a head start.
They open savings accounts. They set aside birthday money. They postpone purchases of their own. They do all this knowing that even a modest amount saved early may have more time to grow than a much larger amount contributed later.
Trump Accounts recognize something important: Time matters.
The earlier a child begins accumulating savings, the less pressure there may be to catch up later
A young adult with some money already set aside begins life in a different position from one starting at zero. That money might help with education, a first home or long-term retirement planning.
The program also gives families a framework for regular contributions.
A grandparent who might otherwise buy another toy can add to the account. An employer can contribute. A family can direct a portion of birthdays, holidays or tax refunds toward the child’s future.
Those contributions can add up.
Still, we should not confuse a good beginning with a complete plan.
Inflation gets 18 years, too
Here is the problem with talking about how much an account may grow:
We usually discuss the future balance without discussing what that balance will buy.
The Federal Reserve targets 2% inflation on average, over the long run.
At 2% annual inflation, $1,000 received today will lose about 1/3 of its purchasing power in 18 years.
At 3% inflation, its buying power would fall by nearly half, to $587.
At 4%, it would be less than $500.
To be clear, the money inside a Trump Account is not expected to sit still. The entire purpose of the account is to give the balance an opportunity to grow over time.
But that growth must first outrun inflation merely to preserve the original contribution’s buying power.
Only growth above inflation represents a real improvement.
That is not an abstract concern.
The Bureau of Labor Statistics reported that consumer prices were 4.2% higher in May over the previous 12 months.
Now, inflation may fall from that level. It may return to the Fed’s 2% target.
But even 2% inflation compounds over time! A little loss of purchasing power each year becomes a substantial loss over a decade. Or a childhood.
This is the part of long-term planning that optimistic projections tend to leave in the fine print.
They show us how large the number may become. They rarely show us how small and weak those future dollars are…
Accumulation is only the first job
I tend to think of long-term savings as having three phases.
The first is accumulation.
You set money aside. You add to it regularly. You give it time to grow. Trump Accounts are designed primarily for this job, and they may perform it quite well.
But the second job is preservation.
Preservation asks a different question:
How much of that savings’ purchasing power survives inflation, recessions and periods of instability in the financial system?
Those two jobs are not the same!
An account can increase in dollar value while declining in terms of purchasing power.
Imagine a child’s account doubles over many years – but the cost of tuition, housing, health care and transportation more than doubles… The statement shows progress. But that progress, that balance, is an illusion because costs have risen faster than wealth.
That is why families should judge long-term savings in terms of purchasing power, not merely the number displayed on the account.
What Trump Accounts cannot provide
Trump Accounts are intentionally limited during childhood.
The money must remain in a prescribed category of traditional financial assets. Parents cannot freely choose among every possible form of savings.
For example, physical gold and silver are not available within Trump Accounts.
That is not evidence of a hidden agenda. It’s just how the program was designed (similarly to most 401(k) plans, options are limited).
That makes the accounts easier to administer, easier to understand and less vulnerable to parents making highly speculative choices for their child’s future prosperity.
The tradeoff is limited diversification.
All the account’s holdings remain connected to the conventional financial system, to traditional assets. There are no tangible options available, no asset whose value exists independently of a fund manager, financial institution or electronic ownership record.
That does not make Trump Accounts worthless.
I argue it simply makes them incomplete.
A hammer alone is useful, but it’s no substitute for a complete toolbox.
Trump Accounts perform one specific job: Encouraging long-term accumulation of wealth, within a standardized account with limited options.
They were not designed to provide every form of diversification a family might need.
The benefits will not be distributed equally
There is another limitation worth acknowledging.
The $1,000 government contribution is the same for every eligible child.
What happens after that will vary enormously.
One family may be able to add the maximum amount every year. (Grandparents and an employer may contribute, too.)
Another family may claim the initial $1,000 but have nothing left over to contribute after paying for rent, food, insurance and child care.
Eighteen years later, those children will not have remotely similar balances.
In fact, this is a limitation of nearly every savings program. If you don’t have extra money, if you can’t spare a dime, then you can’t save. Those who can afford to save the most generally receive the greatest benefit.
For a family living paycheck to paycheck, a locked account also does nothing to solve today’s problems. The funds cannot be used for diapers, doctor visits, groceries or child care.
Ideally, eventually, it helps the 18-year-old. It does not necessarily help a newborn’s parents.
Again, that does not make the program bad.
It means we should describe the benefit honestly.
Trump Accounts are a long-term savings tool – not immediate economic relief. Certainly not a cure for inequality.
Inflation is not a hypothetical risk
The original draft described inflation as a certainty because the Fed’s target is above zero.
That idea is directionally right, but it needs more precision.
Prices do not rise at exactly the same rate every year. Some prices fall. Inflation can slow, accelerate or temporarily reverse in particular categories.
Over the longer run, however, monetary policy explicitly aims for a rising overall price level.
A 2% annual target sounds gentle.
Over 18 years, it means cumulative price increases of roughly 43%.
At 3%, prices rise by about 70%.
At 4%, they roughly double.
That is the quiet arithmetic facing every child with a Trump Account.
The account does not merely need to grow.
It must run an 18-year race against the declining purchasing power of the dollar.
Sometimes the account may win comfortably.
Sometimes the race may be close.
No one can guarantee the outcome.
A head start is not the finish line
So, what should families make of Trump Accounts?
First, the $1,000 contribution is real. Eligible families should understand the rules and decide whether to participate based on their own circumstances.
Second, the account benefits from time. Early savings have an opportunity that savings started decades later do not.
Third, the account does not solve every financial problem.
It cannot help with most immediate childhood expenses. It cannot guarantee that its growth will exceed inflation. And during the child’s growth period, it cannot hold physical precious metals or provide diversification outside conventional financial markets.
That is why families should see it as one part of a broader plan.
Physical gold and silver serve a different purpose from a Trump Account.
They are tangible savings held outside the banking system. They do not depend on a child’s account manager, a government contribution or the performance of an economically-sensitive asset class.
Precious metals prices do fluctuate, but even so they can provide a form of diversification that Trump Accounts are not designed to offer.
This is not an argument against Trump Accounts. It is an argument against asking one account to do every job.
By all means, give our children a head start.
Then remember what inflation, time and economic uncertainty may do along the way.
Eligible adults interested in learning how physical precious metals may fit into their own tax-advantaged retirement savings can request our free 2026 Precious Metals Information Kit.
Trump Accounts themselves cannot hold physical precious metals during the childhood growth period, but families can still consider tangible savings as part of their broader diversification plans.