If you've been following the news lately, you already know the market can be volatile. So a reasonable question for any parent considering a Trump Account is: what happens to my child's money if the market tanks?
It's a fair concern. And the honest answer isn't "don't worry about it." It's "here's how to think about it."
Yes, the Balance Can Go Down
Trump Accounts are invested in U.S. equity index funds, specifically low-cost S&P 500 or broad market ETFs. That means the account's value moves with the stock market. When the market drops 20%, the balance drops too.
There's no floor, no insurance, no government backstop protecting against market losses. The $1,000 seed the government deposits is real money invested in real funds, and it can lose value.
That's important to understand upfront. This is not a savings account. It's an investment account.
But Here's What Actually Matters: The Time Horizon
A Trump Account opened at birth won't be touched for 18 years. That's the whole point. Withdrawals aren't allowed until then (outside of narrow exceptions like first home, medical, disability, and education). For details on the full rules, see the complete Trump Accounts explainer.
18 years is a long time. The U.S. stock market has never had a negative return over any 18-year rolling period in history. That's not a guarantee of the future, but it's meaningful context.
Even the worst stretches, the 2008 financial crisis, the dot-com bust, were followed by recoveries. A child born today has 18 years before any of that matters to them.
What a Market Drop Early On Actually Does
Here's something counterintuitive. If the market drops in years 1 through 5 of the account's life, that's not necessarily bad.
When you're contributing $5,000/year and the market is down, every dollar you put in is buying more shares at a lower price. When the market eventually recovers (and over 18 years, it historically has), those shares are worth more. This is called dollar-cost averaging, and it works in the account holder's favor when contributions happen during downturns.
The families who get hurt by market drops are the ones who need the money soon. A family with 18 years of runway is in a very different position. If you're thinking about how much your child's account can grow, consistent contributions through up and down markets is a major factor.
What About Right Before They Turn 18?
This is the one scenario where timing matters more. If the market drops significantly right before your child turns 18, the account value will reflect that.
But here's the thing: at 18, the account converts to a traditional IRA. Your child doesn't have to withdraw anything. They can leave it invested, let it recover, and keep compounding for decades. Early withdrawal after 18 comes with standard IRA rules (income tax plus a 10% penalty before 59 and a half), so most financially-savvy families would let it sit.
Should This Change Whether You Open One?
For most families, no. The combination of the government seed, 18 years of compounding, and the long-term historical performance of U.S. index funds makes this a strong foundation for a child's financial future.
If stock market volatility genuinely concerns you, it's worth reading whether a Trump Account is the right fit for your family before deciding. But for parents thinking long-term, the time horizon is the single biggest thing working in your favor.
The market drops. It also recovers. And 18 years is a long time.
Find out if your child is eligible for the $1,000 government seed at investamericaquiz.com.
Have more questions about how these accounts work? Here's every question people are asking about Trump Accounts.
This post is for educational purposes only and is not tax, legal, or investment advice. Grifin is not affiliated with the U.S. government or the Invest America program.
