529 Plan vs. Trump Child Savings Account: Which Can Help You Save More

Families comparing a 529 plan vs. a Trump Account are weighing two distinct ways to build long-term savings for education and other child-related expenses. A 529 plan remains a dedicated education savings vehicle, allowing tax-free growth and withdrawals for qualified academic expenses. The Trump Account, created in 2025, provides more flexibility: each eligible child receives a $1,000 government seed deposit, and families can contribute up to $5,000 per year after taxes. Earnings grow tax-free, and funds can later be used for education, home purchases or other qualified life expenses.

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529 Plan vs. Trump Child Savings Account: What Are They?

A 529 plan is a state-sponsored savings program designed to help families invest for future education costs. Funds are typically placed in portfolios that include a mix of mutual funds or ETFs and fixed-income assets, like bonds. The account’s growth depends on market performance and will be tax-free if used on qualified education expenses, such as tuition, books and, in some cases, room and board at eligible institutions.

While states administer these plans, investors can choose an out-of-state plan if it has more appropriate investment options, though they might miss out on in-state tax deductions.

The Trump Account takes a broader approach to saving for the future. Established in 2025 in the One Big Beautiful Bill Act, it was designed to give children a financial foundation that extends beyond education. Each eligible child receives an account at birth with an initial federal deposit. Accounts can hold either index mutual funds or exchange-traded funds (ETFs).

Unlike traditional education-only accounts, Trump Accounts can eventually fund major life milestones like a first home or entrepreneurial ventures in addition to higher education. This flexibility reflects a shift toward viewing long-term savings as a way to build intergenerational wealth rather than focusing solely on schooling.

Contribution Limits

Individual states determine the contribution rules for 529 plans; the federal government sets no annual limit. Most states allow total account balances to exceed $300,000, reflecting the cost of higher education. However, contributions are considered gifts for federal tax purposes. As such, individuals can give up to $19,000 per beneficiary in 2025 without triggering the federal gift tax (for married couples, that limit jumps to $38,000).

A special five-year election rule also allows front-loading up to $95,000 at once, treating it as if it were spread evenly over five years for tax purposes. Married couples who want to front-load a 529 plan can contribute up to $190,000.

Trump Accounts operate under different parameters. Families can contribute up to $5,000 per year in after-tax dollars for each eligible child, with no state-by-state variation. Employers can also contribute up to $2,500 annually per child without including that amount in the employee’s taxable income. Starting in 2028, the $5,000 annual limit will begin to adjust for inflation.

Tax Treatment and Withdrawal Rules

Both 529 plans and Trump Accounts offer tax advantages, but they differ in how contributions, earnings and withdrawals are handled. The structure of each reflects its underlying goal: 529 plans are tailored to education, while Trump Accounts are designed for broader, long-term use.

529 Plans

Contributions to 529 plans are made with after-tax dollars, though many states provide a tax deduction or credit for residents who invest in their own state’s plan. Earnings grow tax-deferred, and withdrawals are tax-free when used for qualified education expenses, such as college tuition, books, housing and certain K–12 tuition up to $10,000 per year.

Accountholders can also use the funds for apprenticeships, or up to $10,000 in student loan repayment ($20,000 beginning Jan. 1, 2026). Withdrawals for qualified purposes are taxed on the earnings portion only at the beneficiary’s ordinary income rate and face a 10% federal penalty, though exceptions apply for scholarships, death or disability.

Trump Accounts

Trump Accounts are treated as traditional IRAs for federal tax purposes beginning in the calendar year the account beneficiary turns 18. Before that age, contributions are not tax-deductible, and earnings grow tax-deferred. Contributions made before age 18 are capped at $5,000 per year (excluding exempt contributions) and excess contributions are subject to a 100% tax on the earnings portion.

Withdrawals from a Trump Account are prohibited before the calendar year in which the beneficiary turns 18, except in limited cases like trustee-to-trustee rollovers to ABLE accounts at age 17 or distributions of excess contributions. After the beneficiary turns 18, the account follows traditional IRA rules. This means withdrawals of earnings are subject to ordinary income tax, and withdrawals made before age 59 ½ without a qualified exception (such as for first-time home purchase or disability) are generally subject to an additional 10% early withdrawal penalty.

529 Plan vs. Trump Child Savings Account: Which Is Better?

The better choice depends on what you want the money to accomplish. If your goal is to fund your child’s education, a 529 plan generally delivers stronger results when contributions are higher. Suppose you invest $10,000 annually for 18 years and earn an average annual return of 6%. By the time your child turns 18, your balance could grow to roughly $309,000. All investment gains can be withdrawn tax-free for qualified education expenses, such as tuition, housing or books. For families certain about paying for college or graduate school, this structure maximizes after-tax growth tied to education goals.

If your aim is to help your child build a more flexible financial foundation, a Trump Account offers broader potential uses. With $5,000 in yearly contributions growing at the same 6% rate for 18 years, the balance could reach about $155,000. That money could later be used for college, a first home or a new business. Withdrawals for qualified purposes are taxed only on earnings, making it adaptable if your child’s plans evolve.

“Most parents should consider the Trump Accounts a nice bonus, but not the central vehicle, for their education savings strategy,” said Tanza Loudenback, Certified Financial Planner™ (CFP®). “Contributions from employers would offer an effortless boost, but it remains to be seen how many companies will opt in.”

For a head start on retirement, Trump Accounts also offer a long runway. Once your child begins working, some of the funds could transition into a Roth IRA, where tax-deferred growth can continue toward future retirement savings.

Bottom Line

Both 529 plans and Trump Accounts help families invest in a child’s future, but their strengths lie in different goals. A 529 plan aligns with education-focused savings, offering strong tax benefits for schooling costs. The Trump Account supports more flexible, lifelong uses. This makes Trump Accounts potentially more suitable for families seeking a broader financial foundation for their children’s future.

Savings Tips for Your Family

A financial advisor can recommend the right mix of accounts and investments to balance growth , tax efficiency and accessibility as your children grow. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
If your child earns income from a job, they can contribute to a Roth IRA up to the annual limit or their earned income, whichever is lower. Because contributions are made with after-tax dollars, withdrawals in retirement are tax-free. Opening a Roth IRA early gives decades for compounding to work in their favor.

Tanza Loudenback, a Certified Financial Planner™ (CFP®), provided the quotes used in this article. Please note that Tanza is not a participant in SmartAsset AMP, is not an employee of SmartAsset and has been compensated. The opinions voiced in the quote(s) are for general information only and are not intended to provide specific advice or recommendations.