Key takeaways

• Trump Accounts offer tax-deferred growth, restricted early access, and a $1,000 federal contribution for eligible children.
• UGMA and UTMA accounts offer broader investment choices and flexible use, but assets transfer to the child at the applicable age.
• Families can use both account types, balancing retirement-focused savings with funds for broader child-related expenses.

For families looking to start their kids off with strong financial footing, options abound beyond basic savings and checking accounts.

Beginning on July 4, 2026, contributions could be made to Trump Accounts. Trump Accounts are special traditional IRAs for children with tax-deferred growth, strict investment and access rules during the growth period, and a one-time $1,000 federal pilot contribution for eligible children.

Custodial accounts — usually UGMA or UTMA brokerage accounts — are another option that allow for broader investments and flexible use for the child's benefit. However, contributions are irrevocable gifts, investment income may be taxable each year, and the child takes control of the account at the applicable state-law age.

Here’s a breakdown of account features and how they can fit into a bigger financial plan for your family.

What Trump Accounts and custodial accounts are designed to do

Trump Accounts are special traditional IRAs for children

A Trump Account (also referred to as a 530A account) establishes the child as the account owner from the outset, while a parent, guardian, or other responsible party manages the account while the child reaches legal capacity, typically age 18. The special growth-period rules end on Dec. 31 of the year the child turns 17, after which traditional IRA rules generally apply.

Parents, guardians, and other authorized individuals can elect a $1,000 federal pilot-program contribution for an eligible child’s Trump Account. To qualify for the $1,000 contribution, the child generally must be a U.S. citizen born between January 1, 2025, and December 31, 2028, and have a valid Social Security number. The $1,000 federal pilot-program contribution does not count toward the Trump Account’s $5,000 annual contribution limit. Other contributions may be subject to the $5,000 limit and may have different tax or gift-tax treatment depending on the source of the funds.

Contributions and earnings in these accounts grow tax-deferred, similar to a traditional IRA.

Custodial accounts usually mean UGMA or UTMA accounts

Another way for families to start a child’s nest egg has been through custodial accounts; Uniform Transfers to Minors Act (UTMA) and Uniform Gifts to Minors Act (UGMA) accounts are among the most common. Both allow adults to save and invest assets on behalf of a child, though the types of assets allowed under the two laws and other rules can vary by account type and state.

Contributions to these types of accounts are considered irrevocable gifts for tax purposes, which means that a gift tax return may need to be filed if an individual gives more than the 2026 IRS $19,000 annual gift threshold (or $38,000 for married couples per donor, per recipient) in a given year.

A custodial brokerage account is not a custodial IRA

Custodial accounts come in different forms. While UTMA and UGMA accounts can be one way to build savings, they are not expressly designed just to meet retirement goals. A custodial IRA can complement other parent-managed accounts and can house money specifically for a child’s future retirement needs. However, these accounts require the child to have earned income and follow IRA rules.

Read more: Investing for kids: Account options and how to start

Eligibility, contributions, and free money compared

Investment options

Depending on a family’s goals and investment horizon, Trump Accounts and custodial accounts can straddle the balance of simplicity and flexibility.

Trump Account contributions must be invested in a diversified index fund of U.S. stocks during the growth period, and fees and expenses cannot exceed 0.1% of the balance of the investment.¹ The default investment announced by the U.S. Treasury is the State Street SPDR Portfolio S&P 500 ETF (SPYM), which tracks the S&P 500 Index. Treasury has also selected four additional low-cost index ETFs for the Trump Account investment lineup.²

This investment category does not guarantee returns, and index funds can be more exposed to stock market volatility depending on its component companies — though a focus on long-term investing can help give context to short-term movements.

Custodial accounts have more investment options than Trump Accounts. Depending on the account provider and what’s allowed under applicable state law, a custodial brokerage account could hold stocks, bonds, mutual funds, ETFs, and other permitted assets.

Investors with a wider range of choices should remember to understand the fees involved across each asset class, along with maintaining portfolio diversification.

An important question to ask when choosing any type of account for a child is: When will this money be needed? A retirement-oriented time frame gives a child decades of potential growth compared to a nest egg that could be tapped for higher education or a car purchase.

Withdrawals, access, and who controls the money

As children get older, they may start taking on more financial responsibilities — such as student loans, where defaults have hit record levels amid rising tuition costs and other factors.³ That’s made managing education debt a priority for many American families, along with bolstering emergency savings. It’s important to understand how these types of accounts stack up in terms of liquidity and ownership.

There are important differences in how control of these accounts transitions to the child. For a Trump Account, special rules apply while the child is under 18. Beginning in the year the child turns 18, the account generally follows traditional IRA rules, including rules for investments and withdrawals. By contrast, with a UGMA or UTMA account, the assets belong to the child, but a custodian manages them until the applicable age under state law, when control of the account transfers to the child.

Setting up a strong foundation of money basics and keeping kids involved with family finances can make a difference as they age and take on new decisions. According to Empower data, more than three-quarters of Americans (77%) said they didn’t feel they understood how money works until age 18 or later.

Which account fits your family's goal?

Choosing between a custodial account and a Trump Account can depend on a family’s financial goals, how much flexibility they want, and what contributions may be available. As priorities and circumstances change, families may want to weigh the features and tradeoffs of each.

When having a Trump Account can work for you:

• If the child qualifies for the $1,000 pilot government contribution or additional charitable additions are available
• Parent's employer offers a Trump Account contribution
• Family wants retirement-oriented compounding with restricted early access.
• Family is concerned about annual taxes in a custodial brokerage account.
• Family is concerned about the child receiving unrestricted control at the state-law transfer age.

When a custodial account setup can be a good fit:

• Family wants money available for a broad range of child-related needs.
• Family wants broad investment choices.
• Family is deciding where the next voluntary dollar should go after emergency savings and the parents' retirement priorities.
• Flexibility of use and investment choice are more important than current annual taxation.
• Those contributing gifts understand the financial transfer is irrevocable and the child will take control of the money at adulthood.

Can you use both?

Yes, a child can benefit from having both a Trump Account and custodial accounts. Using both can give families more ways to diversify and maximize their saving opportunities, as long as families follow the distinct requirements of each account. Custodial accounts generally provide greater flexibility for permitted child-related uses, while Trump Accounts have statutory restrictions on access during the growth period.