Trump's $1,000 baby bonus idea takes a leaf out of Warren Buffett's wealth-building playbook
President Donald Trump wants the next generation of Americans to be stock investors from birth — an idea that could easily have come from Warren Buffett.
The US leader's so-called Trump Accounts are part of his proposed "One Big Beautiful Bill," a huge package of tax and spending legislation that's been approved by the House of Representatives and is now under Senate scrutiny.
If passed, the government would open a tax-deferred investment account for every newborn citizen born between January 1, 2025 and December 31, 2028, and seed it with $1,000.
Each child's guardian would be in charge of their account, able to deposit up to $5,000 a year into it, and allowed to invest in broad US index funds that don't use leverage and minimize fees and expenses. Withdrawals wouldn't be allowed until the age of 18, and the account would automatically terminate when the holder is 31.
"This will afford a generation of children the chance to experience the miracle of compounded growth and set them on a course for prosperity from the very beginning," the White House said on its website, highlighting endorsements from the CEOs of Dell, Goldman Sachs, Uber, and Altimeter Capital.
The bosses of Arm, Salesforce, ServiceNow, and Robinhood have also signaled they're willing to contribute to the Trump Accounts of their employees' children.
'Start young'
Buffett, the CEO of Berkshire Hathaway, has long recommended investing from a young age in a low-fee, broad-market index fund and holding for the long run as the most reliable way to build wealth over a lifetime.
"Start young," Buffett told a shareholder who asked how to become a multibillionaire during Berkshire's 1999 meeting. He explained that "the nature of compound interest is it behaves like a snowball of sticky snow. And the trick is to have a very long hill, which means either starting very young or living to be very old."
Buffett, whose net worth now exceeds $150 billion, said at the 2001 meeting that saving $10,000 by the time he turned 21 gave him a "huge, huge headstart" in life. It meant he could afford to get married and have kids while still having spare money to invest.
"While he hasn't commented directly on government-funded stock accounts for newborns, the investing logic behind such a proposal aligns with his core principles," Lawrence Cunningham, the author of "The Essays of Warren Buffett" and the director of the University of Delaware's Weinberg Center, told Business Insider.
"Buffett would likely agree that giving more Americans a long-term stake in the market — especially through low-cost vehicles like the S&P 500 — is both financially sound and socially beneficial," Cunningham said.
The Berkshire chief, who bought his first stock at age 11, turns 95 in August, meaning he's been compounding his wealth for more than eight decades. Buffett has repeatedly said more than 99% of his wealth is in Berkshire stock, which he's owned since the 1960s.
'Eighth wonder'
David Kass, a finance professor who's been following Buffett closely for nearly 40 years, told BI that Trump's program could help to reduce wealth inequality by "encouraging additional savings, providing more of a safety net, promoting financial literacy, and exposing everyone to a stake in corporate America while experiencing the 'eighth wonder of the world' — compounding."
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Berkshire declined to comment.
It's worth noting that even if the program launches as planned and every American child owns a piece of the stock market from birth, lower-income parents might struggle to invest the maximum $5,000 a year into the account, allowing kids with more affluent parents to quickly pull ahead.
Children from wealthier families might also have additional savings accounts and assets, other advantages such as access to better healthcare and education, and significant inheritances in their future, limiting the potential for a single government payout and account to narrow the wealth gap.
Yet Buffett might still see the plan as a step in the right direction. He has long heralded compounding over decades as the secret to wealth creation, as it can turn even a small amount into a fortune. For example, a $1,000 investment that compounds at 8% annually for 65 years would be worth nearly $160,000.
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