Trump Accounts vs 529 Plans: Practical Advice for Parents Saving for College
By Mark Fried, Wealth Manager, Partner, Merit Financial Advisors
College is expensive, but the real cost often extends beyond tuition alone. Those stroking the check must also factor in housing, food, books, transportation, and personal expenses, which can add up quickly. The College Board’s 2025 data shows that the average total cost for a private nonprofit four-year college is about $65,470 per year. That means a four-year degree could cost nearly a quarter-million dollars, and that doesn’t even factor in future cost increases.
Recently, we have received a lot of questions about Trump accounts versus 529 plan accounts. What’s the difference? As a parent or grandparent, should you put money in a 529 plan, a Trump account, or both? Here are some quick takes which we think you will find helpful.
What are Trump Accounts and how are they different from 529 Plans?
A Trump Account works like a starter IRA for kids. It gives children an early investment account that can be used for college and other long-term financial goals. Parents should know that this is an investment account, not a checking or regular savings account. That means its value can rise or fall with the market, but the main advantage is tax-deferred growth over time.
Children under the age of 18 with a Social Security number are eligible. However, only U.S. citizens born between 2025 and 2028 can receive the $1,000 federal contribution to start the account.
By contrast, a 529 Plan, also known as a qualified tuition program, is run by states or schools and lets people prepay or save for education expenses. The main tax benefit is that earnings are usually not taxed by the federal government, and often not by states, if used for qualified education costs.
What factors should parents consider when deciding which plan to choose for their children’s education savings?
Start by thinking about your main goal. If you want to save mainly for education, like college, vocational school, or some K-12 costs, a 529 plan is usually the best option. If you want to help your child build long-term wealth, and your family is eligible for the $1,000 seed contribution, you might also consider a Trump Account as an extra tool.
Setting up either account does not involve walking into a bank, either.
For Trump Accounts, families start with the IRS election process, and then later, there may be rollovers to financial institutions that offer a Trump Account product. 529 Plans can be found by searching your state’s offerings or choosing from an alternate provider. The good news is that you can open both, but the bigger question becomes how to fund them.
What advice do you have for parents who are saving for their child’s education today?
Parents have a lot of agency to save for their child’s education. You want to start saving early, even if you can only put away a small amount. Choosing the right account to fund your savings goal matters, so be sure to do your research. Still, you don’t want to put too much money in one place without considering flexibility, financial aid, scholarships, additional children’s needs, and your family’s cash flow. Lastly, you’ll want to review your plan every year, since tuition, tax rules, and your family’s situation can change.
Here are some practical steps to consider:
- Start with a realistic target based on the factors you understand or things you know about your child’s preferences. Anticipate the full cost of attendance, not just tuition, to estimate how much you’ll need to save.
- Prioritize how you’ll use different accounts to do the job. For example, earnings in a 529 plan can be tax-free when used for qualified education expenses.
- Open a Trump Account if your child qualifies for the $1,000 seed contribution.
- Consider coordinating with grandparents and relatives. The IRS says anyone can set up a 529 and name anyone as a beneficiary. Similarly, Trump Account contributions can come from sources such as parents or any other person during the growth period before the beneficiary reaches age 18. Be sure to consult with a professional to best understand how relatives can support funding these accounts, either directly or separately.
- Do not let the account drive the plan. At the end of the day, this is a planning decision, not a product decision, and you must consider the benefits, drawbacks, and alternatives of the choices in front of you.
The biggest mistake families can make is treating these accounts as either-or and not starting to save early enough. A 529 and a Trump Account may both have a place, but they serve different purposes. 529s are an education tool. Trump Account is more of a long-term financial foundation tool. The right answer depends on the child’s age, the family’s savings capacity, tax situation, and goals.
Don’t ask, ‘Which account is better?’ Ask, ‘What job do I need this account to do?’
Curious about how much to save for college expenses and where to allocate the funds? A financial advisor can help with that. Merit Financial Advisors offers complimentary consultations to help bring clarity and structure to your financial life. Let’s start the conversation today.