US Government is funding $1000 by investing in index funds for newborns

Industry Insights
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:question: What is it?

The Trump Child Savings Account—part of the proposed “One Big, Beautiful Bill”—is a tax-deferred investment account for newborns designed to build early-life financial assets via stock market exposure.

:question: Who is eligible?

  • Children born between Jan 1, 2025 and Dec 31, 2028

  • Must be U.S. citizens

  • At least one parent/guardian must have a work-eligible Social Security Number

  • Each eligible child receives one account only

:question: How much will the government contribute?

  • A one-time $1,000 seed will be automatically deposited by the Treasury

  • This applies only to eligible newborns in the 2025–2028 window

:question: How do contributions work?

  • Families can make after-tax contributions up to $5,000 per year per child

  • Contributions grow tax-deferred and are invested in a U.S. stock index fund

  • Government/corporate matching is allowed and does not count toward the $5,000 cap

:question: When can funds be accessed?

  • No access before age 18

  • At age 18: Withdraw up to 50% for qualified uses (education, business, first home)

  • At age 25: Withdraw 100% for qualified uses

  • At age 30: Withdraw for any purpose; account must be closed

:question: What are qualified uses?

  • Post-secondary education or training

  • First-time home purchase

  • Starting a small business or family farm

:question: What about taxes?

  • No taxes while money grows

  • Withdrawals for qualified purposes taxed at long-term capital gains rate

  • Non-qualified uses before age 30 taxed at ordinary income rates, may face penalties

:question: Can the account be transferred to another child?

No. The account is permanently tied to the named child. It cannot be reassigned or reused.

:question: Who controls the account?

  • Parents/guardians act as custodians until the child turns 18

  • After that, the child gains phased control

:question: How much will the Trump savings program cost taxpayers?

The program’s $1,000 government-funded seed contribution for each eligible child is projected to cost approximately $3.6 billion, based on 3.6 million U.S. births in 2023 (data from the National Center for Health Statistics).
However, former President Trump claims the initiative will have “absolutely no cost” to taxpayers, stating that the funds will be sourced from other provisions within the “Big Beautiful Bill”—notably a proposed 3.5% tax on remittances sent abroad.

:question: How much could the $1,000 grow over time?

If invested in a broad market index like the SPDR S&P 500 ETF (SPY):

  • A $1,000 investment made 18 years ago (as of June 9, 2007) would have grown to $5,590, assuming reinvested dividends.

  • The same investment made 31 years ago would be worth approximately $22,770 today.

These figures illustrate the power of long-term compounding in equity markets—something the Trump account aims to harness by investing from birth.

Some financial experts have expressed skepticism about the Trump savings program, noting that its benefits may be limited when compared to more established, tax-advantaged options like 529 college savings plans. Here’s a comparison of key features between the two:

:bar_chart: Quick Comparison: Trump Account vs 529 Plan

Feature Trump Child Savings Account 529 Education Savings Plan
Purpose Broader: Education, home, business Primarily education
Government Seed $1,000 (one-time for 2025–2028 births) None
Annual Contribution Limit $5,000/year (after-tax) No federal limit; state caps ~$300k–$500k+
Tax Benefit Tax-deferred; gains taxed at withdrawal Tax-free growth and withdrawals for education
Qualified Uses Education, first home, small business Education (K–12, college, loans, apprenticeships)
Control Custodial till 18; child-owned thereafter Parent-owned; flexible beneficiary change
Aid Impact (FAFSA) Likely treated as student asset (less aid) Parent asset (minimal aid impact)
Access Timing 18+ (partial), 25+ (full for qualified), 30+ (any) Any time for education
Transfer to Others? :x: Not allowed :white_check_mark: Allowed to family members

Do we have something similar in India? This looks like nice thing to do for kids future

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Interesting ! @nithin your thoughts on this? India should do something like this in my view

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I dnt knw bout USA,but here, i think it would be politically very risky given risk averse nature of public.

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So the govt is already under huge debt and their solution is to add further to it with freebies? Wasn’t US the largest economy? Guess they want to swap places with India. Freebies is a slippery slope and no govt should engage in it, no matter how bad the country’s condition is. It creates a huge divide between doers and free-eaters.

Not to mention, who will manage the fund? Blackrock, Blackstone, JPM, Vanguard? So they end up having greater portion of the market with money received from the govt for free.

US will see a birth rate boom for the coming three years, and this will mess up the demographic data with a spike in births for 3 years, and then a fall. So opposite of COVID where insurers saw sudden spike in deaths. Plus, near Dec-2028, there will be a lot of pre-mature births too, to rush before the scheme ends. So early birth mortality data will get messed up there too.

Families who cannot afford even one child will start having 4-5 kids for freebies. So domestic debt goes up 3-5x in the coming years. Even though they cannot withdraw it, the money is still there.

Once child turns 18, there will be mass withdrawals - so down the line, in 2043-2046 the markets will see a fall driven by such withdrawals from the fund, and even more in 2050-2053, and a boom in housing markets at the time. Education remains expensive so inflation will eat away any growth in the fund that happens.

In the coming three years, US hospital and pharma industry would be one to invest in, in my opinion. There will be a boom in their profits from child births. Plus any childcare services and products like diapers and stuff - those companies will see unexpected growth in revenue for the coming years.

Interesting move, but not sustainable for the long term - giving freebies is and always will be bad. If a parent really wanted to create a fund for their child, they would do it either way regardless of freebies from the govt.

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@Prakashsingh - No India should definitely not do something like this. We already have tons of funds being spent on freebies, tons of money blocked in EPS/NPS/PF and other govt schemes. Ladli behen yojana and other schemes are only making people want more free stuff, and not work on improving their lives. People are sitting on the edge of their seats for the next freebie to fall.

People are already breeding in the country like anything. BPL families having 10-12 kids, to be able to make their personal cricket team, but not engaging in basic thinking of what would help them is why the country is sinking.

On paper we are fourth largest, but in reality the 85% of the country is no better off than they were 5 years ago. The rich and affluent are already spending tons to feed the poor via taxes being used for freebies.

Also, such schemes will only bring more volatility to the markets. So every month a ton of money will get injected into the market due to child births. and Near maturity a ton of money will flow out too. Markets will go up - i agree, but when kids reach 18, there will be huge drops too. It is not sustainable.

We dont need another reason for the poor to breed like crazy. Nothing against them, we already are at the tipping point where freebie schemes have higher funding than our space programs.

As Harvard students are being punished by Trump, Hong Kong universities opened their doors to any student who was affected. Why didn’t indian universities do the same? Where were the IITs, IIMs, AIIMS and others who could try to expand their seats for making room for students? Why dont we question this?? The universities claim world class education, but are themselves ashamed of even trying a more global reach.

More freebie is not the solution. More “education” - beyond literacy is the solution. Indians going abroad may be literate, but many still behave like uneducated people, and this is why Indians are not respected outside India.

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I am sure there must be many things government does, unfortunately, it is not advertised properly and hence we are unaware. I wish someone writes a paper on this. All the benefit Government give forget poor or rich.

Government Hospitals in every state or district, I am sure everyone can go, do we know how much they charge vs private. I am sure it will be miniscule the cost, yes of course the crowd will be there, but do we know the charges - I dont.

Ration shop where concession food items are given. Why is it nobody writes about it. I am sure there will be a huge difference. I feel India does many things but it is not written or advertised. Heard there was a pension scheme for self employed like taxi drivers etc. Just heard about it but not sure

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Exactly, the freebies are not advertised so that tax payers dont get angry. It is done in silence to please voter banks. The country is already almost doomed, we dont want more new schemes to further doom it.

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I don’t think India can afford to do this. And anyway, you want Indians to have fewer kids, don’t want some incentive that encourages having kids. And in India, we generally tend to game the system. :slight_smile:

If you see the GDP, it is alright, what isn’t is the population. Hence, the per capita is abysmally low.

https://x.com/Nithin0dha/status/1927300654642446586

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Unfortunately, some state governments are thinking otherwise.

They seem to be encouraging to have more kids through incentives, forgetting that we are already the most populous country in the world.

Just came across this Yesterday

Andhra CM N Chandrababu Naidu pitches financial incentives to have more kids

I am looking at giving financial incentives by taking a family as a unit. The bigger families may get higher incentives.

Naidu announced financial assistance of Rs 15,000 for every schoolchild. “We give this money directly to the mothers of students. Apart from this, the NDA govt in AP is planning to announce financial assistance to couples for having more kids.” The two-child policy previously applicable to prospective candidates for panchayat and municipal polls has been reversed.

In 2023, Sikkim announced incentives for indigenous people to have more children. Mizoram, too, has been encouraging tribal couples to have more than two kids. Tamil Nadu CM M K Stalin said recently that with the Centre pushing for population-based delimitation of constituencies, there was a need for people in the state to have more children.

I guess the proposed delimitation too, to some extent is influencing this push for having more kids, especially in the southern states.

Instead of giving unnecessary freebies (key word is unnecessary), the centre and state govts need to focus on building the basic necessities, be it quality education for all, quality low-cost health care, good infrastructure and mostly importantly a clean environment.

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Something on the GDP per capita (may not be that abysmal after all)

Unlike nominal GDP, which converts local earnings into U.S. dollars using exchange rates, PPP (purchasing power parity) adjusts for cost-of-living differences and what money can actually buy in a country.

According to PPP, India’s GDP per capita climbs to $9,000–10,000—roughly three times higher. And that makes a massive difference. “That same $1 in the US may get you a bottle of water. In India, it could buy you a full meal, a bus ticket, or even a haircut