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In a recent podcast interview, U.S. Treasury Secretary Scott Bessent argued that one of the Trump administration’s most impactful long-term legacies will be the creation of Trump Accounts.
Trump Accounts are a new, tax-deferred savings account for American children. Starting in 2026, the federal government will give US$1,000 to eligible newborns that will be invested on their behalf in low-cost index funds.
“These Trump Accounts, I believe, are a game changer,” Bessent said.
“Right now, about 38 per cent of Americans do not own equites … By giving every child $1,000 at birth for these accounts, we’re going to increase financial literacy, we’re going to increase people’s optimism in the market. … [E]veryone gets a stake in American prosperity. I think this is going to make every man and woman a market participant.”
The Trump administration’s move in some ways follows in Canada’s footsteps. Canada already does help children save for their future education through the Registered Education Savings Plan (RESP) and Canada Learning Bond (CLB).
But certain features of the Trump Accounts would be worth emulating here.
One of the Trump Accounts’ most attractive features is that the money will be invested for children in a diversified portfolio of equities. This $1,000 investment will have an estimated worth of about $6,000 by the time a child turns 18, if historical stock market returns continue.
Canada, by contrast, gives low-income children an initial payment of $500 at birth, and up to $2,000 by the time they turn 15 if they remain low income. But this Canada Learning Bond is simply placed in an account; it is not necessarily invested on their behalf.
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Parents who are themselves not financially literate may leave that money sitting in the bank, uninvested — a missed opportunity for wealth creation. Others may invest the money in high-fee mutual funds or conservative Guaranteed Investment Certificates.
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It is of course parents’ prerogative to invest their own money as they see fit. But it should also be the government’s prerogative to invest its contributions in the most wealth-maximizing way. Any investment advisor worth their salt will tell you that low-cost index funds are the best way to invest for the long-term today.
Trump Accounts are also attractive in their simplicity. The government will give all eligible newborns a single, one-time payment of $1,000 at birth, and parents (or other contributors) will be permitted to contribute up to $5,000 per child each year.
The RESP and CLB are, by contrast, very complicated. Just look at their rules.
For the CLB, a child’s parents must continually re-confirm that they remain low income each year to entitle the child to an additional $100 contribution from the government.
With the RESP, parents (or other contributors) can contribute up to $50,000 per child, with the government matching up to $7,200 per child. However, there are specifications around the government’s annual match amount, lookback provisions, family account sharing rules and so forth. And we haven’t even gotten into the withdrawal terms.
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As we have written before, complexity favours the wealthy. Indeed, the government’s data show the “take-up rate” for the CLB in 2024 was just 43 per cent, meaning a majority of children who were eligible to receive a government contribution did not receive it. Canada could almost certainly increase the take-up rate by simplifying its rules.
Another noteworthy feature of the Trump Accounts is that they permit beneficiaries to use the savings for a wide variety of purposes. These include paying for education, making a first-time home purchase or starting a business.
Canada, by contrast, only permits money from the RESP and CLB to be used toward education. Why not also help Canadians get a foothold in real estate or start a business, both potential vehicles for significant wealth creation?
Finally, it is worth noting that Bessent emphasized not only the investment itself, but the opportunity for education that these investments present.
“Here at Treasury we’re going to do a dramatic amount of financial literacy, financial education, we’re going to push that out to the schools,” Bessent said on the podcast. “I think this idea of every American learning that money can make money for them [is powerful].”
This is a hopeful vision for reducing inequality: empowering future generations not merely through investments, but through knowledge.
Here, too, Canada could learn something. It could increase financial literacy within schools, but also through institutions such as the Bank of Canada, which must be understood to be trusted.
Canada can be proud of the fact that our government has long been helping young Canadians prepare for their future education. But our approach is not perfect.
The government should automatically invest its contributions in low-cost index funds, simplify its contribution rules, expand eligible uses of the savings, and perhaps most importantly, increase Canadians’ knowledge about the compounding value of money.
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