New Federal Proposals for Child Savings Accounts
The recent federal proposals unveiled by the administration include a plan that will allocate $1,000 to children born between 2025 and 2028. This initiative, referred to as the “Trump Account,” is an evolution of the previous Money Account for Growth and Progress, or MAGA Account.
While the name has changed, the fundamental ideas remain intact. It’s encouraging to see bipartisan recognition of the importance of financial security from an early age.
Bipartisan backing for child investment dates back years. In 2006, Senator Jeff Sessions (R-Ala.) proposed a portable lifetime universal savings account, termed the Plus Account. This model featured an initial deposit of $1,000, allowing for annual contributions of up to $5,000.
Recently, Senator Cory Booker (D-N.J.) reintroduced the America’s Opportunity Account Act, often referred to as baby bonds, which would similarly allocate $1,000 to all children born on or after December 31, 2023.
The Trump account idea draws inspiration from Senator Ted Cruz’s (R-Texas) proposal to invest that $1,000 in an index fund.
Almost two decades have passed since the initial proposal, yet Congress continues to focus on similar starting contributions. Rather than endlessly discussing the matter, it’s worth considering how much stronger families could be today had we built on these early initiatives.
Many believe raising children has become exceptionally costly, and the increasing prices of basic necessities are driving down fertility rates. Families can expect to spend between $15,000 and $21,000 in the first year on essentials like diapers, formulas, baby gear, and childcare—expenses that are critical to parenting.
For instance, from January 2023 to January 2024, the price of baby food and formula surged by 8.7%, significantly outpacing overall inflation. Diapers represent a heavy financial strain; even before the pandemic, one in three struggling families found it hard to afford them, and now many report having to skip work or school due to diaper needs.
Childcare costs are another pressing issue. In nearly every state, full-time care for infants now exceeds $14,000 a year, which is over 10% of the median household income. Reports indicate that daycare expenses have skyrocketed by 263% since 1990, compounded by tariffs raising the cost of essential baby items like cribs and strollers by 128%.
These items aren’t luxuries; they are fundamental necessities that many families are increasingly unable to afford.
While proposals like the Trump account, baby bonds, or Plus accounts are steps in the right direction, they offer little to truly address these pressing costs. Families grappling with immediate financial demands are less likely to contribute to long-term savings, even with a $1,000 head start. Thus, programs like the Trump Account should not be considered standalone solutions but rather part of an integrated approach that addresses both current needs and future opportunities.
The Trump account could signal a shift in how the government supports families and fosters long-term financial stability. The principle is clear: invest early for greater returns down the line.
However, the structural differences are also crucial. Baby bonds were designed to be government-funded accounts that invest in low-risk bonds, particularly benefitting families with limited resources. In contrast, Trump accounts provide a one-time deposit that invests in variable index funds tied to the stock market, introducing a degree of risk.
As a single deposit, this approach might not suffice to create substantial financial growth for those born into economically disadvantaged situations. Ongoing investment is necessary. Families need more than superficial measures—they need solutions that will adapt to rising costs and stagnant wages, bridging gaps between immediate support and enduring financial security.
This isn’t just about individual families; it’s about the nation’s economic potential. According to the Institute for Women’s Policy Research, if women entered the workforce at the same rates as men, the U.S. economy could gain an additional $4.3 trillion this year.
But for that to happen, participating in the workforce relies on affordable child-rearing costs and family stability—areas still under financial strain.
The Trump account acknowledges the understanding that financial opportunities should start at birth. Yet, for serious efforts toward economic resilience, it’s critical that early investments are structured to facilitate continued growth.
Continuous investment offers real, scalable, and evidence-based solutions, much like the suggestions for Baby Bonds and Plus accounts.
To genuinely provide every child with a chance for financial mobility, it’s essential not only to consider when and where we invest but also how we sustain that investment.
