The Trump administration is eager to mint a new class of shareholders: children.
Last year’s One Big Beautiful Bill Act created investment accounts for children, grandiosely named Trump accounts. Proponents of the investment accounts engineered them to put a brighter gloss on capitalism — which younger voters in particular have soured on — and give children a stake in the free market that could pay off when they reach adulthood.
Though 10 million children already have accounts in their names, this week the White House announced that kids will now be auto-enrolled into the accounts, increasing the number of total enrollees to 70 million.
California Gov. Gavin Newsom, a potential 2028 Democratic presidential candidate, has backed the Trump-branded accounts in an early sign of Democratic support for the initiative going foward.
“It also teaches people a little bit about entrepreneurship and watching your account grow. But very simply, this money is your child’s future,” President Donald Trump said Tuesday in the Oval Office. “When your child, the old days, your child would hit 18, and there’s nothing. They don’t have any money, and now they’ll be potentially very rich.”
But auto-enrollment isn’t the only way the Treasury Department is overhauling these accounts. Another change is raising eyebrows in financial and policy circles: direct stock donations from the richest Americans and multinational corporations into kids’ portfolios.
First though, the basics of “Trump accounts.” Under the program, children under 18 years of age are eligible to set up an account, as long as they have a Social Security number to establish U.S. citizenship. The Treasury Department will deposit $1,000 into accounts opened for children born between Jan. 1, 2025 and Dec. 31, 2028 — the duration (more or less) of Trump’s second term. Employers, friends and family can also donate to the accounts, with varying limits, and the contributions are invested in low-risk exchange-traded funds.
The overall concept is not novel. During her first presidential campaign in 2008, Hillary Clinton kicked around the idea of a $5,000 “baby bond” for every child born in the United States. Other Democrats then carried the baton forward. While a 2020 presidential candidate, Sen. Cory Booker of New Jersey put forward his version of a baby bond as a plank toward homeownership. It never amassed serious momentum at the federal level under the Biden administration. Connecticut and California, though, launched their own child savings accounts programs in recent years. California Gov. Gavin Newsom, a potential 2028 Democratic presidential candidate, has backed the Trump-branded accounts in an early sign of Democratic support for the initiative going foward.
I hadn’t expected a Republican administration — or as I like to refer to this chaotic chapter of American history, Trump II — to turn savings accounts for kids from a messaging bill that languished in Congress into a real national program. The proposal of direct stock donations, however, takes this program into uncharted territory.
What’s to prevent its executives from stuffing stock into Trump accounts as a short-term way to juice share prices, fend off corporate tax increases or otherwise incentivize voters to oppose policies that might hurt the company?
This development is more on brand for Trump II since it introduces a set of legal and ethical conundrums for the accounts if it’s not handled carefully. The new rules do not allow parents to pick or reject donated shares and prohibits selling them for five years. In defending the new rules, Treasury officials admitted that individual stock donations “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.” But they spun this as a positive, saying it would “increase the appeal” to potential donors.
So far, the only major stock contribution has come from Gwynne Shotwell, SpaceX president and COO, and her husband, who announced a donation to about 2 million kids who live in poorer communities. SpaceX only took its first baby steps as a publicly traded company this summer, and on Wall Street, the jury is still out on whether SpaceX can justify its equity price. Much of its business rests on the speculative artificial intelligence boom barreling forward uninterrupted, along with success in establishing a human colony on Mars.
What’s to prevent its executives from stuffing stock into Trump accounts as a short-term way to juice share prices, fend off corporate tax increases or otherwise incentivize voters to oppose policies that might hurt the company? And if SpaceX’s business goes south while America’s youngest shareholders are barred from selling, the kids get saddled with crummy portfolios.
For now, Trump accounts’ proponents, like philanthropist Michael Dell, are defending the changes as necessary to help create a new generation of capitalists.
“It seems unlikely that that is some kind of devious plot to somehow influence these 2 million children,” Dell told Yahoo Finance. “If anything, they’re going to be interested in space and capitalism and how capital markets work, compounding and investing, and it will spark an interest in them that hopefully helps them as they become adults.”
Dell struck a cheeky tone, saying, “The alternative is they didn’t have it, right?”
If done right, the Trump accounts could provide kids with a leg-up as they decide whether to pursue a college degree, a trade education or save it for another goal in their life. But this latest experiment in American capitalism risks devouring its children if adequate guardrails aren’t put up to protect them.
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