President Donald Trump formally introduced a program that would deposit $1,000 into the individual accounts of children born between 2025 and 2028. The “Trump Accounts” are designed to grow with investment earnings over time, similar to existing 529 plans and traditional individual retirement accounts, both of which are tax-advantaged savings plans.The “Trump Accounts” will initially be created by the Treasury Department’s designated financial agent, and the money will be invested in broad U.S. equity index funds such as the S&P 500. At this time, it’s unclear exactly how the investment process will work or what specific investments will be made. At a later date, parents or guardians will be able to transfer the full balance to their preferred brokerage firm.Scott Laing, clinical assistant professor of finance at the University at Buffalo School of Management, said stocks are a relatively safe asset class over longer periods of time, and unlike regular savings accounts, money invested in stocks usually has a significantly larger return.This is called a “compounding effect,” where an asset’s earnings from either capital gains or interest are reinvested to generate additional earnings over time. Picture a snowball being rolled forward. As it picks up more snow, it grows faster, like an investment compounding at 10% a year. It grows because each pass adds new snow to the snow already accumulated.Drag the slider to see the snowball grow”That’s why patience is the hardest thing with this compounding effect. It’s 10% on whatever is in there, but whatever is in there is constantly growing for 18 to 40 years, and you might contribute more and more,” said Laing.Investing in and owning stocks can be important in building wealth over time and preparing for a financially secure retirement. A recent survey by the Federal Reserve Bank of Philadelphia found that 57% of American adults do not personally own stocks. The two most common reasons are insufficient financial resources and a limited understanding of the stock market.See how a $1,000 seed investment could grow at a 10% annual rate if started early.Since 1957, the S&P 500 has delivered an average annual return of more than 10%. Using that 10% average as a reference, a $1,000 seed investment could grow to about $5,600. But Laing said the actual value of this $5,600 investment could be about $3,600 after taxes and an early-withdrawal penalty. Trump Accounts convert to an IRA once the beneficiary turns 18, at which point the 10% penalty for early withdrawals before age 59 1/2 applies.”Is that going to be a huge amount? No, but it’s useful. What’s nice with the Trump Account is it’s one of the two main vehicles that parents can use to kind of help finance their children once they turn of age,” said Laing.The Trump Accounts allow parents, guardians or charities to make additional contributions of up to $5,000 per child. Billionaires Michael and Susan Dell pledged $6.25 billion on Tuesday to provide 25 million American children younger than 10. The Dells will put money into the accounts of children who live in ZIP codes with a median family income of $150,000 or less.Employees will also be allowed to make pretax salary-reduction contributions to Trump Accounts owned by their dependent children through an employer-sponsored cafeteria plan, up to $2,500 per employee per year. Who is eligible for a Trump Account?Any child younger than 18 with a valid Social Security number is eligible to open a Trump Account. Only U.S. citizens born between Jan. 1, 2025, and Dec. 31, 2028, are eligible to receive the one-time $1,000 pilot contribution from the Treasury Department.Contributions to Trump Accounts will be accepted beginning July 4, 2026. Parents or guardians can use IRS Form 4547 to establish an initial Trump Account for a child and to elect the $1,000 pilot contribution from the Treasury Department. Beginning in mid-2026, these elections can also be made through an online account at trumpaccounts.gov.