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President Donald Trump encouraged parents to claim their child"s investment account Wednesday after the administration began automatic enrollment, a dramatic expansion of the program aimed at giving kids a stake in the stock market.
"Trump Accounts has turned out to be bigger than anyone ever thought even possible, and we had big, big dreams," Trump said during an event in the Oval Office, referring to the program"s official name.
The U.S. Treasury announced regulations last week that would automatically enroll children under the age of 18 - a long-standing goal of economists and advocates. They have said the optional nature of the investments would primarily benefit wealthier families who already have stakes in the market.
The switch to automatic enrollment boosted the numbers of children who have an account in their name from around 10 million beforehand to 70 million today, according to the White House.
"It"s a big step in the right direction toward the full inclusion of all eligible children for early wealth-building in the United States" said Jin Huang, a professor at Washington University in St. Louis who studies asset-building social programs. Early-childhood investment programs can help kids buy homes, start businesses, prepare for retirement and are tied to higher educational outcomes and better social and emotional development in childhood, he said.
Parents and guardians still need to claim their child"s account through the Trump Account app or the IRS. Children born between Jan. 1, 2025, and Dec. 31, 2028, are eligible for a $1,000 one-time deposit in their accounts, which parents also must elect to receive. For children, particularly those from low-income families, these steps are still hurdles to taking advantage of the accounts, Huang said.
Automatic enrollment benefits children in lower-income groups and incentivizes private donors, nonprofits and governments to contribute to the accounts, Treasury argued in the new regulations released last week.
"These decisions increase the appeal of funding contributions to classes of Trump account beneficiaries and are expected to result in billions of additional dollars per year in general funding contributions," the rules say.
Around 80 percent of Trump Accounts are linked to families earning less than $200,000 per year, according to the White House.
The changes are likely to "increase the capacity of Trump accounts to operate as charitable outlets," said William McBride, chief economist at the Tax Foundation, a tax policy nonprofit. He noted, however, that they come with extra restrictions compared with other saving vehicles like 529 plans.
The expansion was paired with another change. The new rules clarify that companies can donate individual stocks to the accounts, instead of investments into diversified index funds. Parents" and guardians" contributions would continue to be made in diversified index funds.
Those corporate stocks can"t be rejected by parents or their children, and they must hold on to them for five years. Companies also can direct donations to specific cohorts of at least 5,000 children grouped by age or geography.
Treasury acknowledged in the rules that this creates some additional risk for Trump Account holders by concentrating assets in specific stock, but the agency defended the move by saying they are likely to receive more corporate contributions to the accounts than they would if companies were required to donate cash instead.
"Donors are attracted by the hope that a stock contribution with a five-year holding period may lead recipients and their families to feel that they have a stake in the fate of the corporation to a greater extent than if the child"s holdings of the corporation were only through an index fund," Treasury officials wrote.
If it does spur a significant increase in donations, that could be worth the instability, McBride said.
But the restriction on parents rejecting or selling stock could lead to uncomfortable investments or conflicts of interest, said Dean Baker, an economist who co-founded the left-leaning Center for Economic and Policy Research.
"All of us have a company we really wouldn"t want to be associated with," he said. "The idea they can give people money and they can"t say no, that"s kind of incredible."
Several companies already have made contributions to Trump Accounts, which launched in July, including philanthropists Michael and Susan Dell, who contributed $6.25 billion to more than a million children. That donation is now expected to fund $250 contributions for up to 25 million children under the age of 11 in lower- and middle-income Zip codes.
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