The Best Idea From Washington Puts Money In Children’s Pockets
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To investors,
The United States celebrated its 250th birthday over the weekend. While most of the country was attending barbecues, shooting fireworks, or hanging with friends and family, the official launch of the Invest America (also known as Trump Accounts) went live on Saturday, July 4th.
These accounts are a very big deal in my opinion.
Before we get to my reasoning, Google explains this program is a federally-authorized, tax-deferred custodial investment account for children in the US. The program provides newborns (born between January 1, 2025 and December 31, 2028) with a one-time $1,000 government seed deposit in the account, along with allowing annual contributions of up to $5,000 from family or friends. The investment account funds are locked until the child reached at least 18 years of age, but they can continue being invested in the account until the age of retirement when they would be converted to a traditional IRA.
In order for a child to be eligible, they must be a US citizen, have a valid Social Security number, and be born between the approved dates for the program.
So why do I think these accounts are such a big deal?
First, compound interest is the 8th wonder of the world. A big reason why Warren Buffett is one of the world’s wealthiest people is because he started investing at the age of 11. Given that he is now over 90 years old, that means Buffett has been compounding for more than 80 years. I don’t care how much money you start with, compounding any amount for 8 decades will make you very rich.
The newborn Invest America account holders will start their investing careers the year they are born, so this is quite the head start for each participant.
Second, contributing to the Invest America accounts has already become a flex among corporations and business leaders. For example, Michael and Susan Dell committed $6.25 billion to the initiative to seed investment accounts for 25 million American children. The pledge provides $250 each to qualifying child aged 10 and under, aiming to help families build long-term wealth. This morning Gwynne Shotwell and her husband announced the donation of 2 million shares of SpaceX to approximately 2 million children. This is more than $300 million at today’s opening stock price.
Companies like JPMorgan, Bank of America, Steak & Shake, and Coinbase have also announced programs to match an additional $1,000 for each of their employees’ eligible children. Whether we are talking corporations or individuals, these are big dollars being pledged and that will eventually inspire many others to participate outside the government’s initial $1,000 seed investment.
Third, it is very rare to have bipartisan support for anything in government, but that is exactly what has happened with these accounts. In the last few days, I have seen Republicans, Democrats, and Independents all promoting the initiative, including telling their constituents to go sign up for the accounts. It would be a kamikaze mission for an elected official to oppose financial support for newborn children, regardless of which political party is in control when the accounts launched.
Fourth, the Invest America account is held in the name of the child (parents can’t take the money) and the funds can’t be accessed until the age of 18. At that point, an individual is not allowed to take the money and go on a shopping spree. Instead, the money is specifically earmarked for college, starting a business, the down payment on a home, or the capital can stay invested.
Lastly, the recent rise of socialism in America can be traced back to the K-shaped economy. When young people feel like they are falling behind, they become sympathetic to any political movement promising them a different system, especially one that comes wrapped in free buses and free healthcare.
But rather than condemning success and promising handouts, the United States will benefit from giving children a stake in the capitalist system. Help people grow their investment assets. Let them benefit from the system, so they don’t feel like the system doesn’t work later in life. It is hard to hate a thing that has helped you gain financial security.
We know the K-shaped economy exists today. That doesn’t mean we can’t take a long-term view on making sure that gap is much narrower in the future thought. That is ultimately why I think the Invest America accounts are so interesting. They create a long-term incentive that could impact tens of millions of future Americans.
That is an outcome we should all be able to get behind. If you have children and want to check their eligibility, you can go to the website here and open an account.
I hope all of you have a great start to your week. I will talk to everyone next time.
- Anthony J. Pompliano
Founder & CEO, ProCap Financial (Nasdaq: BRR)
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