Trump accounts $1,000 seed money gains banks' match; economists say better investment options available

Three of the United States' four national banks have agreed to match a $1,000 "Trump account" for employees who have children born during his second term.

Among the components of the controversial "One Big Beautiful Bill Act" that President Donald Trump signed into law July 5 is a type of tax-deferred savings account that provides $1,000 from the U.S. Treasury as investment seed money.

Yet, economists question the attractiveness of the accounts beyond the seed money given investment limitations compared with a state-sponsored 529 plan, as well as the ability of low- to moderate-income parents to contribute funds on a consistent basis.

At least 28 companies have pledged a $1,000 match, including Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co.

Eligible for the $1,000 seed money are children who are born of U.S. citizens between Jan. 1, 2025, and Dec. 31, 2028. The $1,000 is projected to be provided into accounts beginning July 5.

However, accounts can be created using the Trump account investment model for anyone under age 18 without the seed money.

Parents and relatives can each provide up to $5,000 annually to the account, while employers are limited to a $2,500 annual contribution.

The funds will be invested in the stocks of "American companies" through what is described as a "broad stock-market index."

JPMorgan Chase said its $1,000 match is for employees who make less than $80,000 in cash compensation. The funds were deposited into employees' 401(k) accounts.

"By matching this contribution, we're making it easier for them to start saving early, invest wisely and plan for their family's financial future," JPMorgan Chase chairman and chief executive Jamie Dixon said in a statement.

"JPMorgan Chase believes that strong financial health is essential for building resilient families and communities."

Bank of America said that "we applaud that the federal government is providing innovative solutions for employees and families to plan for their future, and we welcome the opportunity to participate."

"When teammates have the opportunity to build long-term financial security for themselves and their families, it strengthens our company and the communities we serve."

Wells Fargo has not commented publicly about its participation.

Other participating financial institutions as of Thursday are Bank of New York Mellon Corp., Charles Schwab Corp., Chime Financial Inc., Coinbase Global Inc., MasterCard Inc., State Street Corp. and Visa Inc.

A Simply Wall Street analysis of the Trump accounts said the banks "sit squarely in its core retail and wealth offering, positioning them as employers focused on long-term savings for employees' families."

The accounts are set up in the child's name once a Social Security number is established. Enrollment in most instances will take place when parents file their 2025 federal tax return.

The Internal Revenue Service expects its Form 4547 related to the Trump accounts to be available for online and traditional mail submissions by summer.

The Trump administration is marketing the accounts as a means to "jump-start the American dream."

The goal is for parents, relatives and potentially parents' employers to make contributions to the account until the child turns 18, with most of the account growth coming from compounding interest.

According to the Trump accounts website, by the time the child turns age 18, the account would be worth $6,000 if no other money is added, $19,000 if $250 a year is added, and $271,000 if the maximum $5,000 is contributed by a parent.

Those estimates are based on historical S&P 500 returns, according to the website.

According to projections from the White House's Council of Economic Advisers, for a child born in 2026, maximum annual contribution of $5,000 invested in a broad stock-market index as recent return levels could result in up to $303,800 by age 18, while a $2,500 annual contribution could yield up to $154,800 by age 18.

Once the account holder turns 18, funds can be withdrawn without penalty for specific uses, such as: qualified birth or adoption expenses; disability; disaster recovery; qualified higher education expenses; qualified first-time home buyers; and terminal illness.

It likely won't be clear for years how much of a participation rate there will be with the Trump accounts, particularly in contributions being made beyond the $1,000 seed money.

The accounts are part of an overarching Trump administration cultural initiative to encourage a boost in the U.S. birth rate that has been trending downward for most of the 21st century.

Preliminary federal data for 2025 shows a U.S. birth rate of 11.99 per 1,000 population, which is up from a record low of 10.70 per 1,000 population in 2023.

However, the preliminary 2025 birth rate is down from 14.4 per 1,000 in 2000 and a peak of 24.7 per 1,000 in 1950 -- the first year listed in a federal analysis of the past 75 years.

As of 2024, roughly 50.5% of U.S. births were to white mothers, along with 25.3% to Hispanic mothers, 13.9% to Black mothers, 6.2% to Asian mothers and 0.7% to American Indian/Alaska Native mothers.

Wells Fargo listed having 205,198 as of Dec. 31, which was down 12,334, or 6%, from Dec. 31, 2024. Since the fourth quarter of 2020, the headcount has decreased by approximately 61,450, or 23%.

According to financial research firm Zippia.com, 56% of Wells Fargo's workforce are women. About 80% of all employees are between the ages of 20 and 40.

By comparison, Bank of America has 213,000 employees as of Dec. 31, of which 51% are women and 76% of the workforce is between ages 20 and 40.

For JPMorgan Chase, it has 318,152 employees as of Dec. 31, of which 52% are women, and 76% are between the ages of 20 and 40.

U.S. Treasury Secretary Scott Bessent said the Trump accounts "will instill financial literacy in America's youth in a way no book, test or school curriculum could."

"They will do so by providing students with a hands-on education in the power of compound growth."

Meanwhile, critics of the Trump account claim they will only serve to widen the nation's wealth gap as many low- to moderate-income households lack the means to contribute beyond the $1,000 seed funds.

Similar concerns have been made about state-sponsored 529 plans since its debut.

Critics also say low- to moderate-income households are challenged enough covering everyday households expenses as federal food assistance programs, such as SNAP, and federal healthcare programs have been targeted for funding reductions.

The Urban Institute said that with one-third of American households having less than $2,000 in emergency savings, "it makes them unlikely to contribute to their children's Trump accounts."

"Families with less wealth may be better off putting any additional contributions into traditional investment accounts rather than Trump accounts to save for their children, whereas Trump accounts are likely to only benefit those who have already maxed out existing tax-preferred savings opportunities, like 529 accounts."

An analysis from Kahler Financial Group found the Trump accounts "admirable and appealing, yet also "come with a host of problems that make it a questionable solution for families who truly need help."

"The money in Trump Accounts can grow tax-deferred, but any withdrawals -- even for the approved uses of college tuition, a first home or starting a business -- are taxed at capital gains rates. Access is strictly limited; only half of the money can be withdrawn at age 18, and the rest at age 31."

Kahler said the accounts are "a textbook case of government overengineering" and "doesn't actually fill a gap in the marketplace."

"Behavioral economists and financial planners have long pointed out that savings plans work best when they are easy to use and when the incentives are clear.

"The rules are complicated. The penalties are harsh. Families have to keep track of deadlines, approved uses and a long list of restrictions. For many middle- and upper-income families, the hassle just isn't worth it.

"For families with lower incomes, that $1,000 government deposit is welcome, but it's just not enough to make a meaningful difference if there's no ability to keep contributing.

The American Economic Institute said the Trump administration, including Treasury Secretary Scott Bessent, is making "grossly exaggerated projections of the accounts' payoffs."

"The administration's projections fail to adjust for inflation and taxes, and they rely on unduly optimistic assumptions about future U.S. stock returns.

"What matters is not how many dollars will be in the account at a future date, but what the account holder will be able to buy with those dollars. With 2.4 percent annual inflation -- as projected by the Social Security trustees -- a projected $200,000 account balance (in 2044) would therefore have only $54,000 of buying power in today's prices.

The administration assumes that future annual U.S. stock returns will be slightly above 10%, in line with returns in recent decades.

"Although extrapolating from historical experience may seem reasonable at first glance, it is unwarranted in this context," the institute said.

The state-sponsored College Foundation for NC 529 plan, which debuted in 2000 and has proven to be highly popular, offers several advantages to participants, including an $18,000 annual limit on individual contributions.

The 529 plan features account funding growth free of federal and state taxes. The plan offers more investment options that Trump accounts in terms of short- and long-term investment options.

The funds can be used not only for college, but also K-12 tuition, technical and career education, and apprenticeships. Funds can be used to pay for student loan repayments, computers, books and certain supplies.

"I see three big benefits of 529 accounts over Trump accounts," said Michael Walden, a retired economics professor at N.C. State University.

"Withdrawals are not taxed with 529s. The money can be moved to other children in the event the original child receives a scholarship, and 529 money can be used for qualified expenditures. Trump accounts don't allow any of these.

"If you get the seed money, take it and then do 529s. If you don't get the seed money -- which, as I understand, is a limited group -- go totally with 529s."

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