That Super Bowl ad ran a few weeks ago. "Free money for every American baby." Trump Accounts. $1,000 deposited into an investment account for every kid born in the US, plus parents can add up to $5,000 a year. The money goes into a fund that tracks the stock market.
My daughter saw the ad and asked if she was getting free money. I said probably not — she's 13, not a newborn. She was annoyed. Fair enough.
But the more I thought about it, the more it bothered me. Not because it's a bad idea on the surface. Giving kids a head start on investing sounds great. The problem is what they're investing in.
The fund tracks the overall stock market. Denominated in dollars. The same dollars that have lost 25% of their purchasing power since my daughter was born in 2012. The same dollars that the government can print whenever it needs to fund the next emergency, bailout, or war. They're giving kids "free money" in a currency they're actively devaluing.
It's like giving someone a gift card to a store that raises its prices 7% every year. After 18 years, that $1,000 might be worth $3,000 in nominal terms and buy less than $1,000 buys today. You haven't built wealth. You've run on a treadmill.
I set up a different account for my kids. A Lightning wallet. No minimum age. No government deciding when they can access it. No fund manager taking a cut. Just sats. My son has about 1,200 and my daughter has a few hundred. It's not much in dollar terms. But the supply is capped at 21 million. Nobody's printing more because the debt ceiling needs to go up again.
I'm not against the Trump Accounts. A savings vehicle for kids who otherwise wouldn't have one is genuinely useful. But let's not pretend it solves the underlying problem, which is that the unit of measurement keeps shrinking.
My kids will have both. One account that the government controls. One that nobody controls. We'll see which one actually holds value by the time they're 30.
The primary goal here is not your kid; it's to increase liquidity of the investment manager involved, usually designated banks. They take your funds and lend them out to new borrowers to make more money. Your money and the government's $1,000 sits, and gets some potential gains, but overall it's no different than putting money in a Gov Bond or Roth IRA. In this case, you have to lock it up until set date, but the same thing happens with retirement accounts. In the meantime, inflation eats away at everything. So, the real math here is, how much net profit do you make for free with your government $1,000 by the time it's accessible, versus what you could have done with the money you invest elsewhere instead...At best, you'll probably end up with a free $300 after inflation effects over time.
I don't believe that anything the government gives away for free is truly free, and I completely agree with you. I think it's a smokescreen. Saving money that depreciates every day and in accounts that are controlled and supervised by third parties is a mistake, both in the short and long term.
If you accept money from a gov you are part of a robbery. You are a slave