Tech mogul Michael Dell and his wife, Susan, are making headlines with their generous gift of $250 to 25 million children in the U.S. This $6.25 billion donation aims to support Trump-branded investment accounts. These accounts were set up by Congress to help families save for their children’s future.
Children born between 2025 and 2028 will also get an initial $1,000 from the government. The Dells’ donation targets kids under 10 years old, promoting savings right from an early age. Michael Dell shared in a video, “A little financial head start can open up a world of opportunities.”
Funds from the Dells will go into the new accounts, which can be established for any child under 18. Money must be invested in a simple index fund that mirrors the stock market. Eligible children must be 10 or younger and live in households with a median income below $150,000. The Dells estimate their initiative could reach about 80% of kids in this age group, marking it as one of the largest private donations in U.S. history.
With an estimated worth nearing $150 billion, Dell hopes this act inspires other wealthier individuals to contribute to similar causes. In response, Donald Trump enthusiastically praised the Dells on social media, showing support for their efforts.
How Do the Accounts Work?
Right now, you can’t create a Trump account, but parents will soon have the ability to sign up via a new form from the Treasury Department. They can contribute up to $5,000, a figure likely to adjust with inflation. Starting in July, employers and charities can also add funds.
When children turn 18, the account transitions into a retirement fund. While the money grows tax-free, any withdrawals before age 59.5 might incur taxes or penalties. A 2023 estimate from the White House Council of Economic Advisers suggested that initial government deposits of $1,000 could grow to over $5,800 over 18 years, assuming a 10.3% annual return.
Criticism and Concerns
Critics argue that these accounts may mainly benefit families who can afford to save extra money. Some believe they offer less flexibility than existing options. Treasury Secretary Scott Bessent faced backlash for suggesting the program could replace government-funded retirement benefits, which many view as a risky shift towards privatizing Social Security.
The Tax Foundation noted that while the accounts are well-intentioned, they complicate the already intricate savings landscape in the U.S. Their main benefits seem to hinge on the initial government deposit and any employer contributions.
What Are Parents Saying?
Many parents have mixed feelings. For instance, Grayson Chester, a new dad from Seattle, views the program skeptically but remains willing to accept the government’s $1,000. “I see it as free money,” he said. He acknowledges that options like education-focused 529s currently look better for long-term savings. Still, he believes initiatives like the Dells’ donation may enhance the appeal of these accounts.
Overall, there’s a strong desire among parents to take advantage of this assistance, even if the underlying program may not seem perfect at first glance. The promise of financial support could significantly influence saving behaviors for the next generation.
For more insights and information regarding savings plans, you can visit the Tax Foundation’s report.
