When billionaire Michael Dell was 8 years old, he opened his first savings account.

Every time that young Michael forked a quarter over to the bank teller, he felt a rush from the “power of compound interest,” as he said from the White House on Tuesday, hours after he and his wife Susan gifted an unprecedented $6.25 billion to help some 25 million kids amass savings of their own.

Inside this story

• What is a Trump account?
• So, what’s with the $6 billion?
• Is this actually a new way to give?
• Will this help the kids who need it most?
• Will other billionaires follow their lead?

They will be held in so-called “Trump accounts,” which are essentially miniature trust funds with a couple of strings attached. Established under President Donald Trump’s sprawling tax bill that passed earlier this year, the savings accounts will allow every baby born during his current term to receive $1,000 in funds for investment that they will be able to tap into when they turn 18 — as long as their parents remember to sign them up for the accounts.

But the Dells’ donation, which is likely one of the largest in American history, may also foretell something bigger. If Trump has it his way, then this will be the first of many donations headed directly into American children’s investment accounts.

What is a Trump account?

Slated to launch as part of America’s 250th birthday bash in 2026, the Trump accounts will be open to anyone with a Social Security number who is under the age of 18.

These savings accounts will act like something like a 401k for kids. Up to $5,000 can be added to the accounts per year, including contributions from parents or their parents’ employers. We don’t know most of the details yet, like where the accounts will reside, but any money saved must be invested in low-cost index funds.

$5,000 may not seem like a lot, but if parents contributed and invested the full amount each year for 18 years, with a reasonable 6 percent rate of return, the fund could reach up to $191,000 by the time their child is old enough to cash it out — with $83,000 of that money made from investment gains. Neither the capital nor the returns can be touched, with very limited exceptions, until the kid turns 18. At that point, they can use the funds to pay for tuition or, eventually, a down payment, while what’s left continues to grow in what essentially becomes an investment account that can help them build wealth over their lifetime. If that smart 18-year-old opts to leave the $191,000 untouched through adulthood, their accounts assets will likely climb to over $2 million by the time they turn 60, according to an estimate from Charles Schwab.

While anyone under 18 can qualify to begin a Trump account, in order to qualify for the government’s $1,000........

© Vox