On July 4, Trump Accounts (530A) launched, providing eligible children born between 2025 and 2028 with a $1,000 investment account.
Who wouldn't welcome a financial head start for every child?
But policymakers and the public should not allow themselves to be misled by the fool's gold called Trump Accounts.
The truth is, $1,000 is not enough to put most children on a meaningful path to building wealth. The building blocks of wealth - a college education, a home, a business, or retirement savings - cost far more than a one-time deposit. A $1,000 investment account is a distraction from Baby Bonds' promise of providing opportunities for wealth-building.
That distinction matters in New Mexico, where we must invest in young people so they have the hope and resources to thrive.
New research from the Institute on Race, Power and Political Economy at The New School suggests that Trump Accounts are unlikely to provide the fair start our youth deserve nor reduce America's wealth divide. If history is any guide, they are more likely to widen it.
Why? Because a $1,000 deposit is only the beginning. Families, employers, and philanthropies can contribute up to $5,000 annually until a child turns 18. Those contributions - not the initial deposit - will determine whether a child reaches adulthood with thousands or tens of thousands.
529 education savings plans have shown how this model works; families with financial resources save more, earn more investment growth, and accumulate more wealth, compounding the wealth families already have. Equal access to an account doesn’t create equal opportunity to build wealth.
Without outside contributions, the typical Trump Account will be worth about $4,000 by age 18. Helpful? Perhaps. Transformative? Hardly. Contrastingly, children in the highest-income households could accumulate nearly $70,000 by adulthood. As college, homeownership, and business startup costs continue to climb, a $4,000 account is unlikely to change a young person's economic trajectory.
Baby Bonds are different by design. Rather than allowing differences in family wealth to compound over time, they make larger public investments in children born into households with the fewest assets, ensuring every young adult begins adulthood with reasonable capital to pursue long-term financial security.
The New Mexico Treasurer's Office is pursuing a statewide Baby Bonds initiative establishing publicly funded trust accounts for every child born in New Mexico, a state with the nation's highest Medicaid and SNAP participation rates and the third-highest poverty rate. New Mexico spends roughly $10 billion each year helping families meet immediate needs. With a $7,000 investment projected to surpass $23,000 by age 18, New Mexico Baby Bonds would give children a meaningful headstart toward long-term wealth-building - and a reason to keep roots in the state.
Unlike contribution-based savings accounts that reward families with the greatest capacity to save, New Mexico Baby Bonds recognize that a child's future shouldn’t depend on the wealth of the family into which they are born. Government cannot ignore the cyclical and generational nature of poverty; it has a responsibility to build an economy that works for everyone.
New Mexico has an opportunity to become a national leader in building wealth from the ground up. The question before lawmakers isn’t whether wealth matters - it does. It’s whether public policy should reinforce unequal starting points or help overcome them.
Trump Accounts deserve credit for recognizing that wealth matters. But if our goal is to narrow the wealth divide rather than create more investment accounts, we need policies that invest more in children who begin life with less.
Hon. Laura M. Montoya is the New Mexico State Treasurer. Dr. Darrick Hamilton is a university professor, Henry Cohen Professor of Economics and Urban Policy, and founding director of the Institute on Race, Power and Political Economy at The New School.
The opinions of Laura Montoya and Darrick Hamilton are their own and do not necessarily reflect the views of KRWG Public Media or NMSU.