Trump Accounts Are Supposed To Help Children Build Wealth. But Could They Worsen Inequality?

Key Takeaways

• Trump Accounts could give wealthy families a big advantage, as they can more easily make additional contributions.
• Lower-income families may struggle to contribute to the account, meaning the program could widen the wealth gap rather than reduce it, according to one expert.

President Donald Trump has touted Trump Accounts as a way for young people to build wealth early on, but one expert suggests that these new investment accounts for children could widen the wealth gap.

Trump Accounts, which were established by 2025’s “One Big, Beautiful Bill,” are set to launch on July 5. Babies born between 2025 and 2028 are eligible for an initial $1,000 one-time investment from the government. With these accounts, children can’t access the money until age 18, after which the accounts are treated like a traditional IRA. These accounts may be funded by the government, parents, employers, nonprofits and more.

Founders and philanthropists, including Michael Dell and Ray Dalio, have already pledged to donate to the accounts while employers, such as JPMorgan and Charles Schwab, have said they’ll match the government’s one-time contribution for their eligible employees. Advocates of Trump Accounts say they will provide children with a head start in building wealth.

“Wealthy Americans already had the means and legal tools to invest in their children; thanks to President Trump’s leadership, every other American parent does, too—a game-changer that will only level the playing field,” said White House Spokesperson Kush Desai.

Why This is Significant

The structure of Trump Accounts may benefit wealthy children more than low- or middle-income children, potentially widening income and racial wealth gaps.

While it may give children a head start, David Radcliffe, director of state and local policy at the Institute on Race, Power and Political Economy at The New School, said it could also increase income inequality.

Radcliffe is an expert and supporter of baby bonds, a policy proposal that provides publicly funded investment accounts to low-income babies and children. Investopedia spoke to Radcliffe about the differences between the two initiatives. This interview has been edited for brevity and clarity.

INVESTOPEDIA: Are there differences between baby bonds and the current Trump accounts? If so, what are they?

**DAVID RADCLIFFE: **The rationale of baby bonds is to provide substantial publicly funded startup capital for young adults so they can engage in wealth-building activities, like home ownership, debt payoff, and retirement.

It became a state policy in Connecticut. In Connecticut, every baby whose birth is covered by Medicaid (that’s one in nearly every two babies in the state) received $3,200 of seed funding. That’s triple the amount of public funding compared to the Trump Accounts.

Unlike Trump Accounts, they’re invested and managed by the state. With Trump Accounts, you have to set aside dollars to fund the accounts. But with baby bonds, the accounts are more substantially publicly funded. The design features of Trump Accounts will really be to the benefit of those who are wealthier.

Related Education

Trump Accounts Could Provide a 14% Boost in Retirement Savings by 65, New Analysis Finds

7 Things Taxpayers Need To Know About the Big Beautiful Bill Act

**INVESTOPEDIA: You mentioned that the design of the Trump Account will benefit wealthy people. What do you mean by that? **

**RADCLIFFE: **If almost half of Americans are having a hard time affording their lives, a lot of folks just won’t be able to set aside dollars in a Trump Account.

Let’s say your $1,000 seed funding has a 7% return; it could be worth $3,000 to $4,000 in 18 years without outside contributions. For a child who’s born wealthy and is able to max out the annual $5,000 contribution and receive the $1,000 seed funding, that would be well over $150,000 at age 18.

Importantly, that would broaden and deepen the wealth gap, and particularly, the racial wealth gap in America.

Another hallmark feature of baby bonds is automatic enrollment. The Trump Accounts are opt-in. It tends to be the case that opt-in mechanisms like 529 savings plans are regressive—or that those with fewer means don’t do as well with them because you have to pay attention. Those who are already in a pretty good financial position might have financial advisors tracking this.

Plus, if your account surpasses a certain value, it might make you ineligible for certain public benefits down the road, so there actually might be a disincentive for a family to want to sign up.

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