The US proposes a newborn investment plan, providing each child with $1000 in startup funds.

Recently, the U.S. government announced an investment plan for newborns. This plan will set up an investment account worth $1,000 for each child born in the United States and having a Social Security number between January 1, 2025, and January 1, 2029.

This program is part of a bill currently under review in Congress. Funding sources may include savings from government cuts to other spending programs and revenue from tariffs. Eligible children will automatically be enrolled in the program at birth. In addition to the initial funding provided by the government, families and third parties can contribute up to an additional $5,000 per child account each year.

The use of this account is strictly regulated. Beneficiaries can withdraw 50% of the account balance after turning 18, and can withdraw the entire balance starting at age 25, but only for eligible purposes such as small business loans and higher education. By the age of 30, beneficiaries can fully utilize the entire balance for any purpose.

This is a tax-deferred account primarily used to track the overall economic trends in the United States. As long as the funds are used according to regulations, the account earnings will be taxed at the long-term capital gains tax rate. If the funds are used for other purposes, the withdrawn portion will be taxed as income. Misuse of funds may also incur a 10% penalty.

With a birth population of 3.6 million in the United States in 2023, the government will invest approximately 3.6 billion dollars annually in this program.

However, some financial experts have raised questions about this plan. Some have pointed out that the tax benefits of the new plan are relatively limited compared to the existing 529 college savings plans and Roth individual retirement accounts. Other experts believe that an initial investment of $1,000 may not be sufficient to significantly help children with a down payment or continue their higher education after 18 years.

Nevertheless, this plan seems to have gained the support of some companies. A certain technology company has pledged to provide account funding for its employees' newborns that is equivalent to the amount provided by the government. Some other large enterprises have also expressed their support for this plan, but specific details have not yet been announced.

Overall, although this newborn investment plan has some limitations, it still provides a new option for savings and investment for children in the United States. With the advancement of the plan, its specific implementation details and long-term effects remain to be observed.