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If you have grandkids, one of them may be getting a new investment account this week, whether their parents asked for it or not.
On Sept. 30, the Treasury Department and IRS published rules letting the government automatically open “Trump Accounts” for children. (1)
Starting on or about Oct. 1, Treasury plans to open accounts for more than 60 million kids under 18 who have a Social Security number and no account yet. (2) Only about 7 million had signed up on their own. (3)
President Donald Trump has promised big things. In January, he said the accounts “should reach at least $50,000 in value by the time the child turns 18 and could be very substantially more than that.” (4)
Anyone can chip in, including grandparents, up to a combined $5,000 a year per child. (5)(6) So the question I’m already hearing: should you?
I’ve been a CPA since 1981, and my answer is: maybe, but not before you compare it with a 529 plan. Here are seven things grandparents should know first.
1. What’s automatic, and what isn’t
The account itself opens automatically. The money mostly doesn’t.
Kids born from 2025 through 2028 can get a $1,000 government deposit. (7) But Treasury can’t make that election for a family. A parent still has to file for it, using IRS Form 4547. (2)(7)
So if you do nothing else, nudge the parents. That $1,000 is free money, and it won’t show up on its own.
2. The good part: low costs, long runway
Until the year a child turns 18, the money can’t be withdrawn, and it must be invested in funds tracking the S&P 500 or another index of mostly U.S. stocks. (5)
Those funds can’t charge more than 0.1% a year in fees. (1)
Forced patience and rock-bottom fees are two things most investors never manage on their own. I’ve made my money in stocks by owning good things for a long time, so I like that part a lot.
3. The catch: it turns into a traditional IRA
At 18, the account is generally treated as a traditional IRA and follows the same rules. (5)
Your contributions go in after-tax, with no deduction. Those dollars can come back out tax-free later. But the growth, the $1,000 seed and any employer money are taxed as ordinary income when they’re withdrawn. (6)
And pull money out before age 59½? There’s generally a 10% penalty on the taxable portion unless an exception applies. (6) That’s a lot of strings for a gift to an 18-year-old.
4. About that $50,000 promise
FactCheck.org called the rags-to-riches pitch “dubious.” (8) Here’s why in plain math.
A $1,000 seed growing at 7% a year for 18 years would be worth about $3,380. That’s my illustration, not a guarantee, but it’s a long way from $50,000.
To get anywhere near the president’s number, families, employers or grandparents have to keep putting money in year after year.
Quick aside — most internet financial advice comes from people who weren’t alive during the last recession. I’ve been writing about money for more than 35 years. Want rock-solid advice? Sign up for the free Money Talks Newsletter. Takes 10 seconds. No fluff. No spam.
5. Why a 529 plan may be the better gift
If your goal is education, a 529 is hard to beat. Earnings aren’t taxed federally when used for qualified education expenses. (9)
More than 30 states, plus Washington, D.C., offer a state tax deduction or credit for contributions, and most let any contributor claim it, grandparents included. (10)
The rules keep getting friendlier, too.
Starting in 2026, families can use up to $20,000 a year for K-12 tuition, and 529s now cover career credentials like welding, plumbing and CDL training. Leftover money can even roll into a Roth IRA, up to $35,000 over a lifetime, if the account has been open more than 15 years. (11)
And under the new FAFSA rules, withdrawals from grandparent-owned 529s no longer count as the student’s income. (12) Even the Center for Retirement Research at Boston College says 529 plans “continue to offer better advantages for college savings.” (6)
6. Know the gift rules, and put the plan in writing
In 2026, you can give up to $19,000 per person without filing a gift-tax return. (13) With a 529, you can front-load up to five years of gifts, or $95,000, at once. (12)
Whatever you choose, make sure your own estate plan says what you want to happen to money earmarked for grandchildren.
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7. Want to keep control? Invest in your own name
Money you put in a Trump Account or 529 is gone from your balance sheet. If you’re not sure you can spare it, you can simply invest in your own account and earmark it for the grandkids. You keep control if you need the money for your own care.
SoFi Invest lets you begin with as little as $5 and no account minimum, buying fractional shares or a ready-made mix that spreads money across many companies. Check it out here.
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUEBrokerage and Active investing products offered through SoFi Securities LLC, member FINRA(www.finra.org)/SIPC(www.sipc.org).
And before you give away a dollar, make sure your own retirement is on solid ground. Get a second set of expert eyes. SmartAsset matches you, free, with up to three fiduciary advisors who are legally required to put your interests first. Have $100K+ in investments? Get matched free in minutes.
The bottom line
Trump Accounts aren’t a bad idea. Low fees and a long runway are the right ingredients for building wealth.
But for grandparents, they’re rarely the first place I’d put money. If the goal is college or a trade, a 529 usually wins on taxes. If you might need the money yourself, keep it in your name.
At a minimum, make sure the parents claim that free $1,000.
The best thing you can give a grandchild isn’t a big account. It’s a grandparent who never has to ask them for money.
Sources: 1. Federal Register; 2. InvestmentNews; 3. The Hill (via AOL); 4. The American Presidency Project; 5. IRS; 6. Center for Retirement Research at Boston College; 7. IRS; 8. FactCheck.org; 9. IRS; 10. Savingforcollege.com; 11. Savingforcollege.com; 12. Savingforcollege.com; 13. IRS
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