Finance expert warns parents that Trump Accounts offer limited tax benefits

Personal finance adviser George Kamel of Ramsey Solutions said the recently launched Trump Accounts program, which deposits a $1,000 seed contribution for eligible newborns, offers limited tax benefits. He noted that while the $1,000 can illustrate the power of compound growth, the tax advantages are modest compared with other options.

Kamel explained that the account allows parents to contribute up to $5,000 annually, which is invested in a qualifying U.S. stock index fund. He estimated that, without additional contributions, the balance could reach about $5,800 by age 18, roughly $200,000 by age 55, and potentially $5 million by age 65.

"Save the 529 plan for education. That has way better tax advantages. You're using after-tax income, you withdraw it tax-free, it grows tax-free. That is the best move for education expenses," Kamel said.

He also highlighted that a custodial Roth IRA can be useful but requires earned income, whereas the Trump Account does not. However, Kamel warned that many families focus on investing for their children while neglecting personal financial fundamentals.

"We tell people, become debt-free, have an emergency fund, and invest at least 15% of their income in their own retirement before thinking about investing for their kids," he said.

Kamel stressed that failing to secure personal financial stability can lead to younger generations supporting aging parents, creating additional financial strain. He encouraged parents to view early investing as a way to teach compound growth while first ensuring their own financial health.