When billionaire Michael Dell was 8 years old, he opened his first savings account.
Every time that young Michael forked a quarter over to the bank teller, he felt a rush from the “power of compound interest,” as he said from the White House on Tuesday, hours after he and his wife Susan gifted an unprecedented $6.25 billion to help some 25 million kids amass savings of their own.
Inside this story
- What is a Trump account?
- So, what’s with the $6 billion?
- Is this actually a new way to give?
- Will this help the kids who need it most?
- Will other billionaires follow their lead?
They will be held in so-called “Trump accounts,” which are essentially miniature trust funds with a couple of strings attached. Established under President Donald Trump’s sprawling tax bill that passed earlier this year, the savings accounts will allow every baby born during his current term to receive $1,000 in funds for investment that they will be able to tap into when they turn 18 — as long as their parents remember to sign them up for the accounts.
But the Dells’ donation, which is likely one of the largest in American history, may also foretell something bigger. If Trump has it his way, then this will be the first of many donations headed directly into American children’s investment accounts.
What is a Trump account?
Slated to launch as part of America’s 250th birthday bash in 2026, the Trump accounts will be open to anyone with a Social Security number who is under the age of 18.
These savings accounts will act like something like a 401k for kids. Up to $5,000 can be added to the accounts per year, including contributions from parents or their parents’ employers. We don’t know most of the details yet, like where the accounts will reside, but any money saved must be invested in low-cost index funds.
$5,000 may not seem like a lot, but if parents contributed and invested the full amount each year for 18 years, with a reasonable 6 percent rate of return, the fund could reach up to $191,000 by the time their child is old enough to cash it out — with $83,000 of that money made from investment gains. Neither the capital nor the returns can be touched, with very limited exceptions, until the kid turns 18. At that point, they can use the funds to pay for tuition or, eventually, a down payment, while what’s left continues to grow in what essentially becomes an investment account that can help them build wealth over their lifetime. If that smart 18-year-old opts to leave the $191,000 untouched through adulthood, their accounts assets will likely climb to over $2 million by the time they turn 60, according to an estimate from Charles Schwab.
While anyone under 18 can qualify to begin a Trump account, in order to qualify for the government’s $1,000 starting boost, you have to be a baby born between January 1, 2025, and December 31, 2028.
For middle-class or wealthier families, all of this will sound familiar; Trump Accounts aren’t too dissimilar from the state-run 529 accounts that many parents use to help save for college and other educational expenses. The idea for the new accounts is rooted in longstanding policy efforts that have aimed to help children from lower-income families tap into the same kind of financial tools that wealthier Americans have long used to give their kids a head start.
The gap is real: Fewer than a quarter of American families use 529 plans to help their children save for tuition or other education expenses. Many low-income families simply can’t afford to stash away money from their paychecks each month and may not be aware of the programs.
Democrats like Sen. Cory Booker have long championed the idea of building federally funded savings accounts to help close the gap between the haves and have nots of saving for college, but bipartisan support for such plans has been increasingly growing in “leaps and bounds” in recent years, said Rebecca Loya, research director at the San Francisco Office of the Treasurer, home to the country’s first universal automatic children’s savings account program. Since then-mayor Gavin Newsom launched the program in 2011, the city has automatically created a savings account with a $50 initial deposit for every kindergartener enrolled in public school.
“There’s been a lot of work over many years to try to get legislation at the federal level,” Loya said. “I didn’t expect it to happen this way.”
So, what’s with the $6 billion?
Which brings us to the Dells’ $6.25 billion donation, which will translate into $250 in newfound savings for about 25 million older kids under the age of 10 who didn’t qualify for the $1,000.
“We believe the smartest investment that we can make is investment in children,” said Michael Dell, who is one of the richest people on earth — with a fortune of nearly $159 billion — at the White House briefing.
But $6 billion is a lot, even for him. It’s more than double the roughly $3 billion he and his wife have given to charity over the course of the past 25 years.
Unlike the government infusions, the Dells’ gift will only go to kids who live in zip codes where the median household income is below $150,000. (That’s not very targeted, though; it includes the vast majority of American neighborhoods, barring very wealthy enclaves like Soho or Tribeca.)
In his remarks at the White House, Sen. Ted Cruz, who has partnered with Booker on pushing the idea of children’s savings accounts through Congress and getting it up and running, said he hopes the investments will help American kids see companies like Dell not as “big, bad, scary, corporations,” but as a foothold for “a new generation of capitalists.”
Is this actually a new way to give?
This is not the first time a billionaire has distributed cash — or, more accurately, investment funds — directly to ordinary people.
Giving unrestricted cash to people who need it through one-time infusions — like Covid-era stimulus checks — or regular payments has become an increasingly popular, if at times polarized, way to give, both for the government and for philanthropists. Many of these evidence-backed programs have been funded by philanthropy or public-private partnerships.
But the Dells’ donation is by far the biggest and most visible.
“When I started [Dell Computers] 41 years ago, we created the direct model” of selling computers straight to consumers, Dell told the New York Times this week. “This is sort of the direct model philanthropy.”
Most billionaire philanthropy doesn’t work this way, relying instead on foundations or middlemen to distribute funds, often ever so slowly over time. Take Elon Musk, whose $14 billion philanthropic foundation has consistently failed to give away even 5 percent of its assets as required by law each year.
But, even billionaires known for their large-scale philanthropy, like Bill Gates or MacKenzie Scott, give most of their charity in the form of grants to organizations, not direct payments to people in need.
And while other philanthropists have donated to smaller-scale children’s savings accounts programs or basic income pilots, none of the experts I spoke with could point to another time in American history when a donor collaborated with the federal government at such a scale.
“Anybody who gives away $6 billion in one go is really inspiring and exciting,” said Caitlin Hannon, a philanthropic advisor and president of Building Impact Partners, noting that most donors are also averse to direct payments, because they can’t control where the money lands. “We don’t see philanthropy behaving in this way very frequently.”
Will this help the kids who need it most?
On paper, it very well could. Children’s savings programs like the one Loya helps run in San Francisco have shown real results.
One study found that San Francisco students with savings accounts were 6 percent more likely to attend college, rising to 12 percent for students of color otherwise underrepresented in higher education. And that’s with just $50 in starter cash for each account.
“Income allows families to meet their immediate needs, but wealth is what gives you the opportunity to weather the unexpected and unlock future opportunities,” said Katherina Rosqueta, founding executive director of the Center for High-Impact Philanthropy at the University of Pennsylvania, which considers children’s savings accounts to be a highly effective intervention. “When a child knows that there will be resources available to them for the future, it also helps them think about their future.”
But, there is a major catch. As it stands, families who want Trump accounts — including those $1,000 baby bonuses — will need to opt in to get the money, rather than being automatically enrolled as they are in San Francisco.
“It’s not fundamentally bad, right? It’s free money,” said Elaine Maag, a senior fellow at the Urban Institute. But when families need to sign up to participate instead of being automatically enrolled, many of the low-income kids who could most benefit from the funds are more likely to fall through the cracks, she said.
Their parents might not have the financial literacy to realize the benefits of such accounts — after all, they probably didn’t grow up with a savings plan of their own — and getting the word out about yet another government program can be a major challenge.
And even if the program does succeed at getting low-income families on board, the savings won’t help them cope with the broader challenges many are facing right now. While establishing the accounts, the tax bill simultaneously gutted funding for food assistance like SNAP and health programs like Medicaid.
“The Trump accounts are not a substitute for any benefits being delivered monthly,” said Maag. “In an ideal world, people have access to sufficient resources today and some savings” tomorrow.
The administration has yet to confirm that the accounts won’t be counted as income when it comes to qualifying for those public benefits, which are typically only available to families whose income stays below a tight threshold. If that happens, the accounts could become untenable for low-income families who rely on programs like SNAP to feed their families.
Until all of those details are sorted out by the Treasury Department, it’s hard to know if Trump accounts will help millions of kids or just the ones whose parents had the time to navigate the paperwork.
Will other billionaires follow their lead?
At least one has promised to, so far.
“A lot of people have a good heart, but they can’t give $6.25 billion dollars,” said Trump, whose own foundation was shuttered due to various illegalities but has pledged to donate to the accounts himself, while “a lot of friends of mine have already told me they’re going to contribute a lot of money.”
He expects “hundreds of major companies” to announce plans to contribute in the coming months. When the program was first announced, Dell, Uber, and Goldman Sachs all talked about making major contributions — to their employees’ children, at least. The Dells have already pledged to match the federal government’s $1,000 seed contribution to every child born to their company’s US employees until 2028. No word yet from the other companies’ CEOs.
But Trumpian bombast aside, there are early signs the model could catch on.
Administration officials have floated the idea of donors “adopting a zip code” or “adopting a street” by dropping investment funds directly into children’s accounts, a pretty straightforward pitch for wealthy individuals who don’t have big philanthropic institutions or a community foundation hoping to get involved.
“The public nature and the coordination of the public announcement raises the visibility of this initiative,” said Rosqueta. “It prompts people to consider, ‘Oh, have I cared about reducing the wealth gap? Is this something that I could contribute to?’”
Whether this becomes a new template for giving may depend on whether the whole system actually works. And whether donors across the political spectrum can stomach giving to accounts named after Trump. (It could be worse; they were originally called MAGA accounts.)
