--- title: "Treasury Spells Out How 'Trump Account' Money Can Be Invested. Here's What to Know" description: "The Treasury Department has set the rules for how money in 'Trump Accounts' — the new federal savings accounts for children — can be invested: low-cost index funds only. Here's a plain-English explainer of the accounts, the new investment guidance, and what financial experts say to weigh before opening one." category: "Business" category_url: https://herald.la/category/business author: "Omar Haddad" published: 2026-07-02T15:10:43.000Z updated: 2026-07-02T15:10:43.000Z canonical: https://herald.la/article/treasury-spells-out-how-trump-account-money-can-be-invested-here-s-what-to-know tags: ["Trump Accounts", "personal finance", "investing", "children", "taxes"] --- # Treasury Spells Out How 'Trump Account' Money Can Be Invested. Here's What to Know The Treasury Department has set the rules for how money in 'Trump Accounts' — the new federal savings accounts for children — can be invested: low-cost index funds only. Here's a plain-English explainer of the accounts, the new investment guidance, and what financial experts say to weigh before opening one. The federal government's new savings accounts for children — widely known as "Trump Accounts" — are up and running, and the Treasury Department has just answered one of the biggest practical questions: what, exactly, can the money be invested in? The short answer is index funds, and not much else. ## What Trump Accounts are Created under the 2025 tax law, Trump Accounts are tax-advantaged accounts for children. The government seeds each eligible account with a one-time $1,000 deposit for children born from 2025 through 2028, and families can begin contributing as the program launches around the Fourth of July. Accounts are set up through the IRS, and the child is the owner. ## The investment rules: index funds, low fees The new Treasury guidance is restrictive by design. Money in a Trump Account must be invested in low-cost funds that track a broad U.S. stock index — the S&P 500 or a similar benchmark, [the Treasury announced](https://home.treasury.gov/news/press-releases/sb0551). At launch, contributions default into a State Street S&P 500 exchange-traded fund, with other approved options including Vanguard's Total Stock Market ETF and iShares' Core S&P 500 ETF; Treasury says it will later let account holders choose among the options. Congress capped the funds' fees at 0.10% a year, and the chosen ETFs come in well under that. What's not allowed is just as important: no individual stocks, no bonds, no cryptocurrency, no sector or international funds, and no actively managed products. The idea is to keep costs low and steer families away from risky bets with a child's money. ## The tax catch This is where Trump Accounts differ sharply from the college-savings plans many parents already know. A 529 plan lets you withdraw money tax-free for education. A Trump Account does not work that way: the growth is tax-deferred, not tax-free, and when money comes out, gains — and the government's $1,000 seed — are generally taxed as ordinary income, [as J.P. Morgan Asset Management has explained](https://am.jpmorgan.com/us/en/asset-management/adv/investment-strategies/529-college-savings-plan/529-or-trump-account-the-answer-for-newborns-is-both/) in comparing the two. Contributions can run up to a few thousand dollars a year, and the accounts are generally locked until the child turns 18. Advisers note there may be an opening at that point to convert the account toward a Roth-style retirement account, potentially at little or no tax if the young adult's income is low — though the details are still being worked out. ## How it stacks up Financial planners generally frame the Trump Account as one tool, not the only one. Its advantages are the free $1,000 seed and the guardrails that prevent costly mistakes; its drawbacks are the tax treatment, the limited investment menu and the fact that the money is tied up until adulthood. For education specifically, a 529 still offers tax-free withdrawals and far more choices. Custodial accounts (UTMA/UGMA) offer flexibility and earlier access but no tax deferral. Which mix makes sense depends on a family's goals and timeline — and, advisers stress, many families may end up using more than one. ## The open questions Because the program is brand new, uncertainties remain. Experts have flagged unresolved issues around how the accounts will affect college financial-aid calculations, how the tax "basis" from different contribution sources will be tracked over 18 years, and whether the more favorable strategies will survive future rule changes. The tax and financial-planning worlds have urged caution while the fine print is finalized. None of this is investment advice, and the right move varies by family. But the headline is now clear: a Trump Account is a low-cost, index-fund vehicle with a $1,000 head start and some real tax complexity attached — worth understanding before you open one for a child. ## Sources - [Treasury announces investment lineup for Trump Accounts](https://home.treasury.gov/news/press-releases/sb0551) - [Trump Accounts](https://www.investor.gov/introduction-investing/investing-basics/investment-accounts/tax-advantaged-accounts/trump-accounts) - [529 or Trump Account? For newborns, the answer may be both](https://am.jpmorgan.com/us/en/asset-management/adv/investment-strategies/529-college-savings-plan/529-or-trump-account-the-answer-for-newborns-is-both/)