Every eligible child in the US should now have access to a tax-deferred investment account authorized by the US government. Whether the initiative, dubbed “Trump Accounts” by its champion, President Donald Trump, will succeed hinges in part on how many families opt to take advantage of the new savings vehicles.

Roughly 70 million Trump Accounts have been established for US children since the program launched in July. Most of those accounts — some 60 million — were automatically set up by the US Treasury Department; less than 1% of those have been claimed by parents as of mid-October. About 10 million accounts were launched separately by families and other contributors.

The idea behind Trump Accounts is for parents, relatives and even employers to be able to chip in funds over time to children’s accounts and let compound interest do the work. The federal government also is providing a $1,000 seed contribution for kids born between Jan. 1, 2025, and Dec. 31, 2028.

Billionaires including Susan and Michael Dell and Bridgewater Associates founder Ray Dalio have pledged funds of their own. Elon Musk, who announced in October that he plans to give a share of SpaceX to each child in the US, intends to distribute the stock through the Trump Accounts initiative, according to a person familiar with the matter. Trump thanked Musk in a post on Truth Social, calling him a “legendary friend.”While the accounts may serve as a springboard for long-term savings, there are other investment vehicles such as 529 plans and custodial brokerage accounts that might offer greater flexibility and better tax advantages, according to financial experts.

Congress created Trump Accounts under the 2025 multitrillion-dollar tax and spending bill. They essentially function like an individual retirement account (IRA) — for kids. Parents, grandparents and other eligible contributors can collectively add as much as $5,000 per child each year, with contribution limits expected to be adjusted for inflation annually after 2027. The child must be a US citizen, and only one account is allowed per child.

Employers can contribute as much as $2,500 per employee per child each year (the amount counts toward the annual maximum), while nonprofits and state and local governments can make tax-deductible contributions that don’t count toward the yearly $5,000 limit.

No money can be withdrawn from the accounts until Jan. 1 in the year the child turns 18. At that point, Trump Accounts automatically convert to IRAs, which can be used penalty-free for certain expenses such as higher education or $10,000 toward a first-time home purchase. Account holders will have to pay income taxes on any earnings or pretax contributions whenever funds are withdrawn.

Under the program’s rules, account funds must be invested in mutual or exchange-traded index funds (ETFs) that primarily hold US stocks. Parents act as custodians, and funds can’t use leverage or charge fees exceeding 0.1% of the balance invested.

In certain circumstances, contributions to the accounts also can be made in individual stocks. SpaceX President Gwynne Shotwell and her husband pledged a gift of SpaceX stock to Trump Accounts for more than 2 million children in the US.

Financial advisers say Trump Accounts create an opportunity for children to begin building wealth for retirement (or for other eligible long-term goals) before they begin working. Previously, children had to have earned income to qualify for a traditional or Roth IRA.

If a family eligible for the $1,000 seed contribution from the federal government did nothing else, the account would grow to about $3,600 from birth to age 18 and roughly $87,000 by age 65, assuming a 7% annual return. An account seeded with $1,000 followed by annual contributions of $5,000 would grow the account to roughly $198,000 by age 18, and to more than $4.7 million by age 65.

Musk’s planned donation adds another high-profile name to the roster of Trump Accounts backers. Dalio said his foundation would contribute $250 to each of roughly 300,000 eligible children’s accounts in Connecticut. BlackRock Inc. said it plans to match the federal government’s contributions to the accounts for employees’ children, seeding them with $1,000 each.

The Dells pledged a $6.25 billion gift aimed at seeding accounts for 25 million American children age 10 and under who were too old to be eligible for the initial government funding. The donation targets kids living in ZIP Codes with median incomes below $150,000.

Each eligible account would receive $250 from the Dells. While that amount is unlikely to grow into a significant nest egg even over a couple decades, Michael Dell, founder of Dell Technologies Inc., said when he disclosed the gift that he hoped to inspire others to give as well.

Other companies that have said they would match the $1,000 seed funding for their employees include Robinhood Markets Inc., SoFi Technologies Inc. and State Street Corp., as well as Comcast Corp. and Chipotle Mexican Grill Inc.

The accounts grow tax-free, and won’t be taxed until money is withdrawn. Any investment gains or tax-free contributions from government, philanthropists or employers will be taxed as ordinary income upon withdrawal. On top of that, account holders would face the 10% IRA early withdrawal penalty if money is used for non-qualifying expenses.

Once the account converts into an IRA in adulthood, account holders might also be able to get a head start at growing money they can use tax-free in retirement. Account holders would be able to convert that traditional IRA into a Roth, paying taxes on the pretax contributions and earnings. The step could benefit young adults while they are in a lower tax bracket in their early working years.

Trump Accounts have fewer tax benefits than 529 college savings plans, which also have far higher contribution limits and can be accessed before a child turns 18.

With a 529 plan, withdrawals are tax-free for qualified educational expenses, and contributions are often eligible for state income tax deductions. Holders of Trump Accounts, on the other hand, would still pay taxes on tax-deductible contributions and investment earnings when withdrawn.

Custodial accounts, which parents manage for minor children until they reach adulthood, can be accessed at any time. Gains from selling assets are taxed at varying rates.

Initial contributions to Trump Accounts are invested in the State Street SPDR Portfolio S&P 500 ETF, a low-cost ETF that tracks the performance of the S&P 500 Index, the Treasury Department said.

The Treasury has selected four additional indexes as eventual investment options: BlackRock’s iShares Core S&P 500 ETF and iShares Core S&P total U.S. Stock Market ETF; Vanguard Total Stock Market ETF; and State Street SPDR Portfolio S&P 1500 Composite Stock Market ETF. The department tapped Bank of New York Mellon Corp. to manage the Trump Accounts launch and develop an app. Robinhood will serve as the initial trustee.

In most cases, relatives who put funds into a child’s Trump Account will no longer have to report those contributions with a gift tax return.

The Trump Accounts program will cost about $15 billion over the next decade, according to the Congressional Budget Office, a tiny fraction of the overall tax and spending package approved in 2025.

Some point to a proposal to create government-funded trust accounts for children as the basis for Trump Accounts. So-called baby bonds were first proposed by economist Darrick Hamilton, a professor at the New School for Social Research in New York, as a way to help low-income Americans build assets and narrow the racial wealth gap. Several states, including Connecticut, have set up baby-bond programs or are in the process of doing so. Hamilton has been skeptical of Trump Accounts, calling them an idea to “address wealth inequality on the cheap.”

Another impetus for the overall approach appears to have come from Kevin Hassett, director of the National Economic Council, who along with economist Robert Shapiro have promoted the idea of accounts seeded with $1,000 for newborns. It’s a “simple solution to help people be connected to financial markets so everybody in the country shares in the wealth,” Hassett said in a presentation to the Aspen Institute in 2024.

Critics, however, warn tax-advantaged accounts may primarily benefit wealthy families who have the extra funds to spare for contributions. To improve economic mobility, participation would have to be broader and more evenly distributed among income groups, according to a McKinsey Institute for Economic Mobility report.