A new way to help your grandchildren get a financial head start has arrived — the Trump Savings Accounts for Children. Created under the OBBBA Act, signed into law in July 2025, these tax-advantaged accounts are designed to encourage long-term savings for kids. Think of them as a blend between a traditional IRA and a 529 plan — flexible, tax-efficient, and built to support young families.
For many grandparents who want to contribute meaningfully to their grandchildren’s future, these accounts offer an additional option to do just that.
How the Accounts Work
The Trump Savings Accounts are available to any child under age 18. Babies born between January 1, 2025, and December 31, 2028 qualify for a $1,000 government seed deposit once an account is opened. It’s essentially free money to kickstart their savings.
Although the law is already in place, custodians such as banks and investment firms won’t begin offering the accounts until July 2026. This delay gives financial institutions and the IRS time to finalize systems and reporting requirements.
Parents, grandparents, and even employers can contribute to the accounts, with a combined limit of $5,000 per year per child. Employers can contribute up to $2,500 of that total. Contributions are made with after-tax dollars, meaning the money you put in has already been taxed. The benefit is that the funds then grow tax-deferred, allowing the account to compound over time without triggering yearly taxes on gains.
Tax Rules and Penalties
The structure mirrors that of a traditional IRA. Your contributions — known as the “basis” — can be withdrawn tax-free. The investment growth inside the account is tax-deferred and becomes taxable only when withdrawn later. Those withdrawals are taxed as ordinary income, not capital gains.
If the funds are taken out before the age of 59½, a 10% penalty may apply unless the money is used for certain qualified expenses. Fortunately, these exceptions are familiar to anyone who has dealt with IRAs: higher education, first-time home purchases, and certain family-related expenses. These carve-outs make the Trump accounts a flexible tool for funding meaningful life milestones.
For a young adult in college or just starting out, withdrawals may not create much of a tax burden anyway. An 18- or 19-year-old with little or no income could potentially take money out for education and offset the taxable amount with their standard deduction. Still, it’s important to plan withdrawals carefully to avoid penalties.
Control and Ownership
One key point to understand is that when the child turns 18, the account legally becomes theirs. From that point forward, they control the funds and can decide how to use them. That might sound empowering, but it can also create challenges if the young adult isn’t financially mature. We’ve all made less-than-wise money decisions at 18. It’s important for families to have open conversations about the purpose of these funds and how they should be used.
This setup is similar to UTMA or UGMA accounts, which also transfer ownership when the child reaches the age of majority. However, the Trump accounts add the advantage of tax deferral — something those older account types lack.
Comparing Options: Trump Accounts vs. 529 Plans
The Trump accounts are being compared often to 529 plans, which have long been the go-to for college savings. The main difference is in how the growth is taxed. With a 529, if the funds are used for qualified education expenses, all the growth comes out tax-free. That’s a major advantage. The Trump accounts, by contrast, are tax-deferred, and withdrawals are taxed as ordinary income, even when used for education.
Control is another major distinction. With a 529, the parent or grandparent who owns the account keeps control over the funds. The child doesn’t automatically gain access at age 18. Many families prefer that arrangement, especially when the goal is to make sure the money is used responsibly for education.
On the other hand, the Trump accounts allow more flexibility. The funds can be used for education, a first home, or the birth or adoption of a first child. If your goals go beyond college funding, this flexibility might make the new account appealing.
What We’re Doing Personally
As financial planners — and parents — we like to practice what we preach.
Tom: “My wife and I already have 529 accounts for our two children and plan to set one up for our new baby. But I’ll also open a Trump account to take advantage of the $1,000 government seed. For my older kids, I may open accounts as well to keep things fair, though without that extra $1,000. I still lean toward 529s as the main education vehicle because of their tax-free growth and parental control.”
Hans: “I’ve funded 529s for my grandchildren for years. I like that their mother — not the children — controls the distributions when college time comes. I’ll continue doing that but will be watching closely as custodians roll out the Trump accounts. When the final rules and platforms are clear, we’ll update our clients.”
Guidance for Grandparents
If you have a grandchild born in the 2025–2028 window, mark your calendar for July 2026, when these accounts officially become available. Opening one could secure the $1,000 seed from the government — a worthwhile gift toward your grandchild’s future.
Even if your grandchildren were born outside that window, you can still open accounts and contribute to them on your own. Many grandparents are choosing to add $1,000 themselves for older siblings just to keep things balanced.
As with all financial planning, the best approach depends on your goals. If your focus is college, 529 plans may still be the most efficient route. If you want flexibility for multiple milestones, or simply want to supplement a 529, the Trump Savings Account could be a great companion piece.
The Bottom Line
The Trump Savings Accounts represent an interesting addition to the financial planning landscape. They’re not a replacement for 529 plans, life insurance, or other savings tools, but they can complement them — especially when used thoughtfully.
At Cardinal Advisors, we’ll continue monitoring developments as custodians and the IRS provide updates between now and July 2026. When the accounts officially launch, we’ll revisit this topic with detailed guidance on how to open and fund them properly.
If you’d like personalized help deciding which savings vehicles make the most sense for your family, give us a call at 919-535-8261 or visit CardinalGuide.com to learn more.
