How Proposed 'Trump Savings Account' Could Help (or Hurt) Future Homebuyers

It’s no secret that life has gotten more expensive. Since the 1970s, college tuition has surged by more than 150% and home prices have jumped 1,045%, according to the Journal of Consumer Research. As a result, Gen Z now enters adulthood with 72% less purchasing power than baby boomers did at the same age.

If those trends continue, Gen Alpha—the youngest and projected to be the largest generation yet—could fall even further behind. Governments are starting to take notice. 

In Germany, officials have proposed an “early start pension,” a government-backed retirement savings program for children as young as 6. And in the U.S., President Donald Trump recently unveiled a plan designed to help every child build long-term wealth from birth.

What is a 'Trump Savings Account'?

As part of the proposed House budget, a new provision called the Invest America Act (not to be confused with former President Joe Biden’s Investing in America Act) would establish a tax-advantaged savings account for every child born between Jan. 1, 2025, and Dec. 31, 2028—dubbed the “Trump Savings Account.”

Each eligible child would receive a $1,000 government-funded seed investment. After that, contributions of up to $5,000 per year could be made by parents, family members, friends, or even businesses. The money would be invested in a low-cost fund tracking the S&P 500, and grow tax-deferred until the child turns 18, with withdrawals after that age taxed at the capital gains rate.

At a press conference, Trump described the proposal as “a pro-family initiative that will help millions of Americans harness the strength of our economy to lift up the next generation.”

The program recipients will “really be getting a big jump on life, especially if we get a little bit lucky with some of the numbers,” he added.

Brad Gerstner, CEO of Altimeter Capital and one of the architects of the legislation, emphasized the power of compounding interest. If families contribute $750 per year, he estimates the account would grow to:

• $50,000 by age 18

• $175,000 by age 30

• $1 million by age 50

We were not able to replicate these figures, but Trump noted that the impact isn’t just financial. 

“Children with savings accounts are more likely to graduate high school and college, buy a home, start a business, and are less likely to be incarcerated,” he said. “Trump Accounts will contribute to the lifelong success of millions of newborn babies.“

Don’t we already have something like this?

If this new savings account sounds familiar, you might be thinking of the 529 plans, tax-advantaged investment accounts designed to help families save for education.

Originally intended for college costs, 529 plans can now also be used for K-12 tuition and apprenticeship programs. Qualified withdrawals are tax-free at the federal level, and often at the state level, too.

These accounts have grown significantly in recent years, with enrollment jumping from 4.2 million in 2003 to more than 16.8 million today. The average account balance has tripled since then, from just under $10,000 to over $30,000, according to Best Colleges.

But while 529 plans are limited to educational expenses, the proposed Trump Savings Account offers more flexibility. Funds could be used for college, buying a home, starting a business, or any other purpose after age 18. Unlike 529s, which are managed by states, the Trump Savings Account would be privately held.

Could a Trump account help your child buy a home?

“Down payment savings, or the lack thereof, can be a major difference maker for many households as they contemplate buying their first home,” says Danielle Hale, chief economist of Realtor.com®. “Having funds can mean getting into your own home years sooner than if you have to save up for a down payment.”

The flexibility of a Trump Savings Account might mean that an entire generation enters adulthood with the funds they need to put that crucial down payment on a home.

In 2024, the median down payment for first-time homebuyers was 9%, or $37,521, on a home priced at $416,900, according to the National Association of Realtors®. About a quarter of those buyers used loans or gifts from family and friends, while 7% relied on inheritances.

That down payment target is within reach of Gerstner’s projections for the Trump Savings Account, but the housing market is unpredictable, and affordability could shift dramatically over the next two decades.

“I expect many of these accounts will be used to fund down payments roughly two decades hence,” says Hale. “An influx of savings like what we might see from these accounts in a market like today's housing market—that is still undersupplied in many parts of the country—would likely push prices higher.”

Still, these accounts could give future buyers a valuable head start, especially those with family support. But that’s also where critics see a potential downside.

“The savings accumulation will be even more powerful if individuals continue to contribute beyond the initial $1,000 seed funding from the federal government,” explains Hale. But the number of families who are able to do so might be smaller than proponents of the legislation realize.

According to a report from the Urban Institute, the proposed structure could disproportionately benefit wealthier families. The bottom 80% of U.S. households hold only half as much liquid wealth as the top 20%, making it harder to consistently fund long-term savings. They’re also more likely to face job instability, and if they need to tap the account for emergencies, they’d face a 10% penalty, making other types of savings accounts more practical.

That said, even without any additional contributions, the $1,000 seed investment alone could grow to roughly $5,000 by the time a child turns 18. Paired with other resources, like down payment assistance or first-time buyer programs, that nest egg could still make a meaningful difference in the homebuying futures of an entire generation.