Every parent hears the same advice: start early.
What is different now is how much help may be available to get started. Between a new federal contribution and several sizable private commitments, some children may be able to begin saving with meaningful dollars in their account before their family contributes anything at all.
Here is what is available, who may qualify, and how these new accounts fit alongside savings options families may already be using.
The Trump Account: A Head Start for Children
The Trump Account is a new tax-advantaged investment account for children. An account can generally be established for a child under 18 who has a valid Social Security number.
For children who are U.S. citizens born between January 1, 2025 and December 31, 2028, the federal government will make a one-time $1,000 contribution to the account, provided the required election is made.
Families and others can generally contribute up to $5,000 per year, with that limit scheduled to be indexed for inflation after 2027. The federal government's $1,000 contribution does not count against the annual contribution limit.
During the child's early years, the account is invested in qualifying low-cost funds designed to track broad U.S. stock-market indexes.
The money generally cannot be withdrawn during the account's growth period. Beginning in the calendar year the child turns 18, the account becomes subject to rules that look much more like those governing a Traditional IRA.
That distinction matters.
Family contributions are generally made with after-tax dollars and create tax basis in the account. The government's contribution, certain charitable contributions and qualifying employer contributions do not. Once withdrawals begin, the normal IRA tax rules generally apply, meaning part of a withdrawal may be tax-free return of basis while another portion may be taxable as ordinary income.
Despite being funded partly with after-tax dollars, this is not a Roth account.
That does, however, create an interesting planning opportunity. Once the Traditional IRA rules apply, the account may be eligible for conversion to a Roth IRA. A Roth conversion can create taxable income on amounts that have not previously been taxed, but an 18-year-old may be in a relatively low tax bracket.
For some families, gradually converting the account during lower-income years could allow much of the child's future investment growth to eventually occur inside a Roth IRA, where qualified withdrawals can be tax-free.
That is one area where thoughtful planning could make a meaningful difference.
Free Contributions Worth Checking
The federal contribution is not the only money potentially available.
Two major private commitments have made these accounts even more interesting.
The Michael & Susan Dell Foundation pledged $6.25 billion to provide $250 contributions for approximately 25 million children.
The program is primarily aimed at children age 10 and younger who were born before January 1, 2025, meaning they were born too early to qualify for the federal government's $1,000 contribution.
Eligibility is generally based on where the child lives. The program targets ZIP codes with median household income of $150,000 or less.
That distinction is important: the test is generally based on the income level of the ZIP code, not necessarily the individual family's income. A higher-income household could therefore still potentially qualify if it lives in an eligible area.
Micron Technology has also committed $250 million, with the goal of reaching up to one million children.
Its program has two major components. Micron plans to match employee contributions by up to $1,000 per child under age 18. It is also offering a one-time $250 contribution for eligible children living in designated communities where Micron operates.
Those communities include locations in Idaho, New York, Virginia, California, Colorado, Minnesota and Texas.
Eligibility for the community contribution depends largely on where the child lives, so families living near a Micron facility should check whether their ZIP code is included.
What About a 529 Plan?
These new accounts do not make 529 plans obsolete.
They serve different purposes.
A 529 plan remains one of the most attractive ways to save specifically for education because investment growth can generally be withdrawn completely tax-free when used for qualified education expenses. Depending on the state, families may also receive a state income-tax deduction or other benefit for contributions.
A Trump Account is broader. Its eventual use is not limited solely to education, but its tax treatment is different and potentially more complicated.
For many families, the right question may therefore not be whether to use a Trump Account or a 529 plan.
It may be how much belongs in each.
A child who qualifies for free federal, charitable or employer contributions should generally take advantage of them. Beyond that, the best savings strategy will depend on the family's education goals, cash flow, tax situation and the flexibility they want the child to have later in life.
Starting early still matters.
But increasingly, so does understanding where the first dollars should go.