The New Child IRAs (“Trump Accounts”): How They Work, Limits, and Why They Could Jumpstart Compounding | Episode 066

And that's what's so intriguing to me.

As you know, I'm a huge fan of getting kids started early with investing to harness that power of compounding.

It's one of the most important lessons, at least in my opinion, that I teach in the financial literacy course that I teach the high school students.

And if you want to learn more about that or hear about the compounding section of that course, you can check out part four of the financial literacy miniseries that I released in episode 58.

And I'll put that in the show notes so you can easily jump to that if you want to Hear more about that.

I frequently talk about the idea of starting early by funding a Roth IRA once you have earned income from, let's say, you're a high school student from a summer job, for example.

And I still think that is a great option, even better than this new account.

However, this new child IRA allows contribution to the child account even before they have any earned income.

And that's the drawback.

of the Roth IRA funding is you have to have earned income in order to make contributions.

So in many cases, a child or a young person may not have earned income until they're 14, 15, 16, 17, something like that.

So they really can't get started on that Roth IRA until then.

Now, when they can, I think that is a better alternative.

But let's talk about this one.

in addition to or in conjunction with a Roth IRA.

Let's dive into the details.

A lot of the large custodians such as Fidelity, Vanguard, Charles Schwab have put out their own information with details about this new account and how it's going to work.

And I will link to Fidelity's in the show notes because I think they did a really good job and I think they laid it out really well.

So let's talk about what this account is, how it works, and what you need to do to open one.