WASHINGTON–Among the provisions in the “one, big, beautiful bill” before Congress is language that could create a new competitive marketplace for credit unions, fintechs and big banks: the so-called “Trump accounts” would provide parents of newborns with $1,000 to invest on behalf of their child’s future. Now, some analysts are offering insights into what the accounts might mean should they become reality.

But how all of that might play out for the financial services marketplace, including credit unions, also remains unclear, but would likely involve a whole new market in which CUs are battling to win business from infants and their parents.

In a statement, President Trump said, “It’s a pro-family initiative that will help millions of Americans harness the strength of our economy to lift up the next generation, and they’ll really be getting a big jump on life.”

The five-year pilot program, which is included in the House version of the bill that passed and which is now before the Senate, could give a financial leg up to a new generation to build savings for their education and beyond, analysts told CNN.

“This proposal meets some, but not all, of the best practices recommended by decades of research on early wealth-building programs,” Madeline Brown, a senior policy associate at the Urban Institute, a Washington, DC-based think tank, told CNN.

How it Works & Who Benefits

According to the news network’s analysis, here is how the program would work and who is likely to benefit most.

Under the proposal, what are formerly known as the “Money Account for Growth and Advancement” (MAGA) accounts — the federal government would put $1,000 into individual accounts for babies born between Jan. 1, 2025 and Dec. 31, 2028.

To be eligible, the baby must be a U.S.-born citizen, and both the parents and the baby must have Social Security numbers. The family and others may make annual contributions to the account so long as combined they don’t exceed $5,000 a year, although nonprofits may be able to donate more, CNN reported.

Where Funds Must be Invested

“The money must be invested in a low-cost, diversified U.S. stock index fund or equivalent, and no withdrawals may be made until the child turns 18. Taxes are deferred on growth until the money is withdrawn,” the report explained. “The account is intended for expenses tied to higher education or ‘post-secondary education credentialing,’ buying a home or starting a small business.”

According to the report, distributions for qualified expenses will be treated as capital gains, which are taxed at a lower rate than ordinary income. 

“But they will be taxed as ordinary income and subject to an additional 10% tax if an under-30 beneficiary uses them for other expenses,” CNN added.

The Pros

According to the report, the pilot program gets good marks on two fronts:

• It will be universal and automatic: Parents won’t have to do much to set up the account, which will “maximize inclusion.”
• It establishes federal assistance from Day 1 of a child’s life:

The Cons

But, as proposed, “the pilot program diverges from the best practices cited in early wealth building research,” CNN reported, noting that:

• It is regressive: Every family — rich or poor, regardless of need — would get the same $1,000 per newborn.
• Because families with greater means will have a much easier time making their own contributions to the accounts on top of the initial $1,000, “those families are likely to end up with far greater savings accumulation at the end of the day.”

In a report in March, the Milken Institute estimated that $1,000 invested in a broad equity index fund would grow to an average of $8,300 over 20 years, CNN reported.

For credit unions, which often talk about winning “share of wallet,” it appears the battle may soon begin before the target market even has one.