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Why Most Kids Aren’t Taking Advantage of ‘Trump Accounts’ — and What That Means

Back in late 2017, when Congress passed the Tax Cuts and Jobs Act, there was a quiet little change that could have a huge impact on families saving for their kids’ futures. You’ve probably heard the term “Trump accounts” thrown around. It’s just a nickname for 529 savings plans, which got a boost thanks to the law allowing these accounts to cover private K-12 tuition—not just college expenses anymore. This was a big deal, opening the door for families to save and grow money tax-free for education, but here’s the kicker: hardly anyone’s really taking full advantage.

Let’s break down the numbers. There are more than 70 million kids under 18 in the U.S., but only around 15 million 529 accounts exist. And many of those accounts cover multiple kids in the same family. So, millions of kids aren’t signed up at all. Imagine if every child had just a modest 529 account set up early on. Together, that could add up to billions in tax-free wealth growing quietly in the background.

I’ve personally seen how starting a 529 early can completely change a kid’s financial future. Even just small monthly deposits add up over time thanks to compounding — and the tax-free growth and withdrawals on qualified expenses are a huge bonus. This is way better than just stashing money in a regular savings account where taxes chip away at your gains.

The biggest barrier? Awareness and misconceptions. A lot of people think 529s are only for the rich or that you need a big chunk of cash to get started. Neither is true. Most states let you open an account with as little as $25. Plus, parents, grandparents, even friends can chip in. It’s surprisingly flexible, but many families simply don’t know this or don’t get the right info.

Here’s a practical tip: If you’re a parent, even setting aside $10 a month from day one can add up to thousands by the time your kid graduates high school. Imagine doing that for millions of kids — that’s a ton of potential wealth left on the table, especially as education costs keep climbing.

But, of course, it’s not all sunshine and rainbows. Investment returns aren’t guaranteed. The stock market can be bumpy, and if you need to pull money out early — say, for K-12 tuition — you might miss out on some long-term growth. I’ve seen families caught in tough spots when the market dips just as they need to withdraw funds.

Also, these accounts tend to be most popular among higher-income families who already have some savings to spare. For families living paycheck to paycheck, setting aside even a small amount can be tough. Plus, the tax benefits matter more if you’re paying taxes on investment gains to begin with, which isn’t always the case for lower-income households. So, while 529s are a good tool, they don’t solve the bigger problems around education affordability.

Another wrinkle: Each state runs its own 529 program with different fees, rules, and tax perks. Some states offer tax deductions or credits for contributions, others don’t. And if you move, it can get confusing trying to figure out where the best benefits are. This patchwork system can be overwhelming and cause some families to throw in the towel before even starting.

So why should you still consider opening one? If you have even a little wiggle room to save, a 529 gives you flexibility. The money can cover a ton of education expenses — not just college tuition, but also books, supplies, and even some apprenticeships. Plus, if your child ends up not going to college, you can transfer the account to another family member. It’s definitely worth considering.

There’s also a newer trend worth keeping an eye on: some employers are starting to offer 529 contributions as a workplace perk. It’s not huge yet, but if companies begin matching these contributions like they do with 401(k)s, it could help close the participation gap. It’s early days, but it’s promising.

Let’s be real, though — 529s aren’t magic. They won’t wipe out student debt or fix deep-rooted education funding issues. But for millions of families who could save but haven’t, these accounts are an underused resource. The loss of decades of compounding and tax-free growth is real money slipping through fingers.

One simple way to stay on track is automation. Set up an automatic monthly transfer, even a small one, and treat it like any other bill. There are also apps that help by rounding up your purchases and funneling spare change into a 529. The easier you make it, the more likely you’ll stick with it.

In my experience, the biggest hurdle is just inertia. Without a pressing need, opening a 529 slips down the priority list. But the earlier you start, the bigger the payoff thanks to the time value of money.

That said, if you’re struggling with day-to-day expenses, it’s smarter to focus on building an emergency fund first. And remember, if your child ends up not using the 529 for qualified expenses, you could face taxes and penalties on the earnings. That’s something to weigh when deciding.

At the end of the day, the “Trump account” isn’t some cure-all, but it’s a useful, flexible tool that’s being overlooked by millions of families. With some better awareness and simpler options, we could see a lot more families putting their kids’ futures on a stronger footing.

Right now, only a small number of eligible kids are signed up. Until that changes, a lot of potential wealth—and opportunity—is staying on the sidelines.

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