American families are being offered a $1,000 head start for their children’s financial futures thanks to the U.S. president’s newfound “Trump Accounts.” The savings plan has been exalted by some as a favorable path to secure a six-figure nest egg for their kids, but personal finance expert Dave Ramsey believes there are better ways to secure wealth.
“While $1,000 offers a nice head start for children, Trump Accounts lack flexibility, restrict access, and limit your investment options,” according to a post from Ramsey’s personal finance company, RamseySolutions.com.
U.S. President Donald Trump introduced the savings mechanism within his broader One Big Beautiful Bill last year. Even some business elite have gotten on board, with Michael and Susan Dell pledging $6.25 billion to fund the accounts.
The plan entails that parents with babies born between the start of 2025 and the end of 2028 will receive a one-time payment of $1,000 from the U.S. Treasury into a tax-advantaged investment account. And starting this July, the parents of eligible kids (U.S. citizens with a Social Security number) under the age of 18 will be able to contribute up to $5,000 a year to their accounts.
Compounded over time, maximum contributions into Trump Accounts could accumulate as much as $271,000 over 18 years, according to a government website about the accounts.
But by being drawn to the allure of a $1,000 deposit, parents may be overlooking better preexisting savings plans. Despite being a supporter of the president, Ramsey dismissed Trump Accounts as a “political stunt,” and pointed out three red flags with the plan: The blog post noted that the account is unusable until kids are at least 18 years old, and when they do come of age, they’ll still have to pay taxes on any investment growth. It’s also restrictive around what they can use the money for, and limits investment choices because of the government’s control, he pointed out.
“[Trump Accounts are] not as revolutionary as the original Roth was. It’s not as revolutionary as the 529 is. It’s none of those things,” Ramsey said on a recent episode of his podcast, The Ramsey Show. “You can add to it, and family can add to it. But it’s just [the] spreading around of money to get people’s attention to a political office. I personally wouldn’t do it.”
Fortune reached out to Ramsey Solutions for comment.
Ramsey’s top savings plan picks for parents, over Trump Accounts
Trump Accounts do have the potential to accumulate significant wealth, so long as families don’t fall behind on contributing $5,000 yearly—a tall order for many American adults already dipping into their own retirement funds. But the plan pales in comparison to the flexibility, tax benefits, and investment options of other savings modalities, Ramsey said.
“If your child is eligible for a Trump Account and that initial $1,000 deposit, go ahead and claim the thousand bucks. That’s a no-brainer,” the Ramsey Solutions post continued. “But for ongoing investing, you’ll likely get better results…by using existing investment accounts like 529 plans, custodial accounts, or a custodial Roth IRA.”
For parents who opt into a 529 plan—geared toward their kids’ college costs—earnings grow tax-free and withdrawals aren’t hit by federal income tax.
Custodial accounts like Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA) are other options Ramsey recommended. For families planning ahead for their kids’ big life expenses—like a down payment on a home or a wedding, the plans have no contribution limit and are much more flexible around investment options. The first $1,350 in earnings are also exempt from taxes, the Ramsey Solutions post explained.
And when parents’ toddlers grow up to be teenagers and take on part-time jobs, Roth IRAs become an incredibly powerful investment option. These young workers can put their earned income into the account, and they won’t have to pay any taxes on the money they withdraw in retirement. And once they turn 18 or 21, depending on where they live in the U.S., all the funds are in their control.
“Trump Accounts might seem like a good idea, but the more closely you look at them, the less appealing they become,” the post said. “When you make contributions to a Trump Account, you’re basically trapping money inside an inflexible, unusable account.”
