The proposed guidance from the U.S. Treasury outlines the criteria for eligible investments in Trump Accounts, which are tax-deferred accounts designed to promote long-term savings for children. The guidance specifies that eligible investments must primarily measure the performance of broad equity markets and maintain low expense ratios.
Treasury Secretary Scott Bessent emphasized that these measures are intended to ensure that children's investments are not eroded by high fees, allowing for greater compound growth over time. Currently, contributions to these accounts are invested in exchange-traded funds that track the S&P 500, with the State Street SPDR Portfolio S&P 500 ETF (SPYM) designated as the default investment.
Other options include the iShares Core S&P 500 ETF (IVV) and the Vanguard Total Stock Market ETF (VTI), among others. Frank Bisignano, CEO of the IRS, noted that even minor differences in investment costs can significantly impact the amount available for children in adulthood.
The initiative is managed by Bank of New York Mellon, and families can monitor their accounts through an app developed in collaboration with Robinhood, which aims to simplify access to investment opportunities from birth. This move is positioned as a way to foster financial literacy and ownership among younger generations