On paper, it seems straightforward. Give kids $1,000 each at birth, let it grow, and help set them up for the future. But the reality hasn't been that simple.

Under the federal Trump Accounts (1) program, kids born between 2025 and 2028 are supposed to get a one-time $1,000 federal seed contribution. If that money grows at the S&P 500's long-term average return of about 10% a year, for example, it could reach roughly $5,800 by the time the child turns 18 — and that's without parents adding a dime.

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If markets perform a bit better than expected, that number could climb even higher, turning it into one of the most efficient wealth-building tools available to families.

Considering only 47% of Americans have enough savings or liquidity to cover a $1,000 emergency (2) expense, this kind of safety net is huge.

So why are tens of millions of kids missing out?

A promising idea with a complicated catch

The program, also known as a 530A account, is designed to use the power of compound interest. A dollar invested at birth is worth way more than a dollar invested later.

But there's a catch: it's not automatic. Parents have to sign up, fill out paperwork, and pass multiple verification steps to access that $1,000. For families juggling jobs, childcare, and tight budgets, that can feel like an insurmountable hurdle. Even seemingly minor conflicts — like needing internet access, remembering deadlines, or understanding eligibility rules — can be enough to halt the enrollment process altogether.

The Treasury Department aimed to have 25 million kids sign up (3), but so far, only about five million are estimated (4) to be enrolled. That's a mere fraction of the whopping 73 million kids who are actually eligible (5). That noticeable gap isn't just a statistic, either. It represents millions of families who could benefit but never make it through the process.

When the Child Tax Credit was expanded in 2021, for example, millions missed out (6) because they didn't file taxes (7) or know they needed to sign up.

It even happens at the state level. The people who need benefits the most often can't get them because of complex red tape. Maine had a similar $500 grant program. When they made it "opt-in," only 40% signed up (8). When they switched to automatic enrollment, there was 100% participation (5).

Other programs have shown the same pattern. When enrollment is automatic, participation tends to be nearly universal. When it requires action, even small action, participation drops — especially among lower-income households.

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A simple solution?

Right now, higher-income families are better at navigating the system, leaving lower-income families behind. As a result, a program meant to reduce inequality can, in fact, widen it.

And every missed account isn't just $1,000 lost; it's years of potential compound growth — and a wider wealth gap for the next generation. Over time, those missed gains could mean the difference between starting adulthood with a cushion or starting from scratch.

Plus, there's an additional risk. If these accounts grow too much, they could make kids ineligible for need-based benefits like Supplemental Security Income (SSI) later on.

There's also a behavioral angle. Research suggests (9) that simply having assets — even small ones — can change how families think about the future, from education decisions to long-term planning. Missing out on the account may mean missing out on those ripple effects too.

On paper, the problem doesn't seem too difficult to solve: make it automatic.

As Jin Huang and Stephen Roll argued in The Washington Post (5), the Treasury already has the data. If they just opened these accounts automatically using Social Security numbers, they'd remove the biggest barrier overnight. No forms, no stress, no missed opportunities.

Until that happens, a policy meant to help everyone is only reaching a few.

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Article Sources

We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines.

The White House (1); Bankrate (2); NBC News (3); CNBC (4); The Washington Post (5); CBS News (6); Tax Outreach (7); K-12 Dive (8); ResearchGate (9)

This article originally appeared on Moneywise.com under the title: The big flaw with Trump accounts: Why millions of American children are missing out on free money

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.