Parents weigh benefits and risks of new government-backed child investment accounts

The U.S. Treasury Department has launched a pilot program that provides a $1,000 government seed deposit for each child born between 2025 and 2028, automatically invested in a U.S. stock fund. The account converts to a traditional IRA at age 18 and can be used for qualified expenses such as education or a first home, with tax-deferred growth until age 59½.

Some parents expressed skepticism about the initiative, citing concerns over political motives and past controversies linked to the program’s namesake. Mississippi Senator Bennie Thompson, a Democrat, told constituents he would decline the account and urged that federal resources be directed toward existing social programs.

Financial advisers, however, generally view the seed money as a low-risk opportunity. Johnson Rhett, a certified financial planner, said the Treasury’s involvement provides a level of governmental oversight that can reassure cautious investors. He recommended using the account alongside other savings vehicles, such as 529 plans and Roth IRAs, to maximize tax advantages.

The application process does not require a dedicated app; eligible families can submit IRS Form 4547 online, a procedure the IRS estimates takes five to ten minutes. Estimates from J.P. Morgan suggest that an untouched account could grow to about $5,000 by age 18, while annual contributions of $250 could increase the balance to roughly $16,000.

Additional private contributions are available. The Dell Foundation has pledged $250 for children aged 10 and under in lower-income zip codes, and Dalio Philanthropies offers a similar supplement for eligible Connecticut residents.

Advisers counsel families to assess the account within a broader financial plan and to consult professionals before deciding.