Action Item: Schedule a call with me to discuss the options to save for your kids' future: https://cal.com/moneytalk/chat

Summary

In this episode, I break down Trump Accounts and whether they're actually worth opening for your kids. I explain how these accounts work (they're basically traditional IRAs for children), why the government is giving away free money, and the tax trap you could be walking into if you're not careful. I walk through custodial taxable brokerage accounts and 529 plans as alternatives that might give you more flexibility without the massive future tax bill. Then I share Alex and Jordan's case study, a couple earning $95k who just had their daughter Sofia and are trying to figure out how much to save and where to put it. The big takeaway: accept the free $1,000, but think carefully before contributing your own money to a Trump Account when other options might work better for your situation.

Resources & Links Mentioned

CBS News: How Trump accounts for kids will work and more key details - https://www.cbsnews.com/news/trump-accounts-kids-explained/

Kitces.com: Why Taxable Custodial Accounts Are Better Than Trump Accounts For Kids' Savings - https://www.kitces.com/blog/taxable-accounts-custodial-kiddie-tax-obbba-trump-accounts-one-big-beautiful-act-roth-rmd-529-plan

Fidelity: Understand the Kiddie tax - https://www.fidelity.com/learning-center/personal-finance/kiddie-tax

Charles Schwab: 6 Financial Planning Tips for New Parents - https://www.schwab.com/learn/story/6-financial-planning-tips-new-parents

Harness: Financial and Tax Planning: 10-Point Checklist for New Parents and Families - https://www.harness.co/articles/tax-and-financial-planning-for-new-parents/

Episode 16: The Complete Emergency Fund Guide for Your 20s and 30s - https://open.spotify.com/episode/2DK8Y2eQ7zw0FZKlGGdVfx?si=ZLY9zxUbTM2x4RddIviGAQ

Episode 4: Estate Planning is Simple and Easy - https://open.spotify.com/episode/4OJMHY6AJ2r5TfA2vfO8GB?si=iJ4BKSkqS9iWGUxjEh_HVA

Timestamps

[02:12] What Trump Accounts really are: traditional IRAs in fancy packaging

[03:16] Who's eligible and how to open a Trump Account

[04:16] Should you contribute your own money?

[04:55] The tax trap: why the government profits from these accounts long-term

[06:30] How custodial taxable accounts can beat Trump Accounts using Kiddie Tax rules

[08:09] Kiddie Tax explained: $2,700 threshold and how it actually works

[09:42] The Roth IRA goldmine opportunity if your kid has earned income

[11:03] Six financial planning tips for new parents (and why retirement comes before college)

[13:32] Case study: Meet Alex and Jordan Martinez and their daughter Sofia

[16:08] Tackling their four big questions about saving for Sofia's future

[18:25] How much to realistically save each month without stressing yourself out

[21:43] The compound interest magic: How $1,000 becomes $304,000 and $20/month becomes $1 million

Email me at fpyapod@gmail.com