In May 2025, the U.S. House introduced Trump Savings Accounts, a program to build wealth for newborns born between January 1, 2025, and January 1, 2029. These accounts offer a $1,000 federal contribution at birth. Additionally, families can add up to $5,000 yearly, tax-free, until the child turns 18. Invested in a U.S. stock index, Trump Savings Accounts leverage compounding to create significant wealth over time.
The Power of Compounding in Trump Savings Accounts
Compounding allows investment returns to generate more earnings. For example, contributing $500 annually to a Trump Savings Account, plus the $1,000 seed, grows substantially. With a 7% annual return (a conservative estimate), the account could reach over $30,000 by age 18. Moreover, contributing the maximum $5,000 yearly could grow to about $250,000 by 18, assuming the same return.
The real magic happens over decades. Funds can be fully accessed at age 30 but can continue to grow indefinitly. Alternatively, withdrawals for education or home buying are allowed earlier. If untouched until age 65, $5,000 annual contributions for 18 years ($90,000 total) could exceed $1.2 million at 7% return. Even the $1,000 seed alone could grow to over $20,000 by retirement.
Want to dive deeper into building wealth through small, consistent actions, read The Compound Effect by Darren Hardy.
Risks and Comparisons
However, risks exist. Future laws might change Trump Savings Accounts’ terms, like tax rules, though contributions are likely safe. Market fluctuations could affect returns, but long-term growth mitigates this. Compared to 529 plans, these accounts offer fewer tax breaks, as gains are taxed as capital gains unless used for approved purposes. Still, their flexibility and federal seed are appealing.
Secure Your Newborn’s Future
By starting early with Trump Savings Accounts, parents can harness compounding to create a millionaire by retirement. To ensure success, monitor legislative updates and consider diversifying with 529 plans, Roth IRAs and even a regular brokerage account. Start saving today to secure your newborn’s financial future.
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