[UNITED STATES] In an early Thursday vote, the House of Representatives passed President Donald Trump’s expansive tax overhaul, a measure that includes a new government-funded savings account for children—featuring a one-time federal deposit of $1,000 at birth.
Dubbed the “Freedom Seed” by supporters, the initial deposit is aimed at giving newborns—especially those in low- and middle-income families—a financial head start. According to analysts, assuming a modest 6% annual return, the account could grow to around $3,500 by the time the child turns 18, offering families a meaningful boost as they plan for their children’s futures.
The new accounts, officially titled “Trump Accounts”—and previously referred to as “Money Accounts for Growth and Advancement” or “MAGA Accounts”—can be used to cover education and training costs, a first home down payment, or to launch a small business.
While the House has greenlit the bill, its fate in the Senate remains uncertain. Some Senate Democrats have voiced concerns over the projected $80 billion cost over ten years, arguing the program could deepen the national deficit. Proponents, however, contend that greater rates of homeownership and entrepreneurship would help recoup the investment through long-term economic growth.
Under the plan, parents will be able to contribute up to $5,000 annually to the account, which will be invested in a diversified fund that tracks a U.S. stock index. Sen. Ted Cruz (R-Texas), who championed the initiative, praised the accounts as a way to provide children with “the miracle of compound growth—the ability to build wealth, which is transformational.”
Still, critics warn the program’s success is tightly linked to market performance. “A sustained market downturn could seriously undercut these savings,” said Teresa Ghilarducci, a labor economist at The New School. “Tying children’s financial futures to Wall Street introduces significant risk.”
How Trump Accounts Work
Much like 529 college savings plans, Trump Accounts offer tax incentives for early saving. Earnings grow tax-deferred, and qualifying withdrawals are taxed at the favorable long-term capital gains rate. “This isn’t wildly different from how a standard brokerage account functions in terms of tax treatment,” said Sam Taube, lead investing writer at NerdWallet.
Other options, such as UTMA and UGMA custodial accounts, allow parents to transfer various financial assets to minors. However, investment earnings in those accounts may be subject to the “kiddie tax,” which is calculated at the parents’ tax rate. By contrast, 529 plans offer tax-free growth and withdrawals, as long as the money is used for approved educational expenses like tuition, books, and housing.
Comparing Trump Accounts and 529 Plans
“529 plans continue to be one of the best tax-advantaged savings tools for families, with a strong track record stretching back nearly three decades,” said Chris McGee, chair of the College Savings Foundation.
A key difference is access: while 529 plans typically require upfront family contributions, Trump Accounts provide an automatic $1,000 at birth, potentially giving disadvantaged children a stronger financial foothold. “This could be transformative in addressing wealth inequality,” said Rashad Robinson, president of Color Of Change.
While Trump Accounts allow for a broader range of uses, 529 plans have recently expanded to include student loan repayment and apprenticeship programs, making them more flexible than before.
Contribution limits are also much higher for 529s. In 2025, individuals can contribute up to $19,000 per child—or $38,000 for married couples filing jointly—without it counting toward lifetime gift tax limits.
“For parents focused on education savings, like myself with teenagers, 529s still offer unmatched advantages,” said Winnie Sun, co-founder of Sun Group Wealth Partners and a member of CNBC’s Financial Advisor Council.
Recent updates now allow families to roll over unused 529 funds into a Roth IRA for the child, as long as certain conditions are met—adding another layer of long-term value.
Eligibility and Concerns
The Trump Account program is available to all children born between Jan. 1, 2025, and Jan. 1, 2029, provided they are U.S. citizens and both parents have Social Security numbers. The funds are administered through the Department of the Treasury.
However, the citizenship requirement has prompted criticism from immigration advocates. “This policy excludes the very children who could benefit most,” said Marielena Hincapié, executive director of the National Immigration Law Center. “It institutionalizes inequality based on parental status.”
Several states, including Connecticut and Colorado, already operate “baby bonds” programs, but the Trump Accounts—especially when paired with a proposed increase to the child tax credit—could provide substantial support to families across income levels, according to NerdWallet’s Taube.
Importantly, families aren’t limited to just one option. “These accounts can complement existing savings vehicles like 529 plans,” Taube noted. Still, for those prioritizing college funding, “I’d recommend starting with a 529 plan,” Sun advised. “It’s more targeted for education and carries significant tax benefits.”
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