The US is giving kids a financial head start - Australia is choosing to fall behind

Every few years, Australia likes to wring its hands about financial literacy, intergenerational inequality, and how hard it has become for young people to get ahead. Yet it does very little about it - other than, of course, stoking demand through erratic policy choices and hoping superannuation quietly sorts out the rest.

Meanwhile, the United States has just done something genuinely bold.

Love him or loathe him, President Trump this week unveiled his centrepiece financial policy: Trump Accounts. Strip away the branding and politics, and it’s an idea worth assessing on its merits.

Here’s how it works:

• Every newborn receives US$1,000 from the government, deposited into an investment account, with parents acting as custodians until age 18 (all children under 18 can still establish accounts)
• The money is mandated to be invested in US equity ETFs or index funds
• Families, employers and charities can contribute up to US$5,000 per year
• Accounts are locked until age 18, at which point funds can be used to buy a home, pay for education, or continue saving for retirement
• Access to the money may be linked to financial literacy requirements

As U.S. Treasury Secretary Scott Bessent put it, the ambition is “the largest merger in history between Main Street and Wall Street” and the creation of a “shareholder society.”

That framing may sound grand, but it touches on something Australia sorely lacks: a practical, lived lesson in the art of long-term saving and compound growth. After all, only around 45% of adults are considered financially literate, and the figure is meaningfully lower among teenagers.

“Students with Trump Accounts will be able to watch their investment accounts compound in real time - from a value of a couple of thousand dollars in kindergarten to potentially hundreds of thousands of dollars,” Bessent said.

Trump has opted to launch the program July 5, the day after America’s 250th birthday, underscoring its importance to him - and big names are getting behind it. Michael and Susan Dell pledged US$6.25 billion to fund Trump Accounts for 25 million children under 10. Ray Dalio followed with a US$75 million commitment as well.

Australia falling behind on literacy

Canada worked this out decades ago. Since the 1970s, it has run a scheme that allows parents to contribute up to C$50,000 into tax-deferred education savings accounts, with government top-ups layered on to encourage long-term investing from an early age.

To be clear, Australia has done many things right. Superannuation means we are already, in effect, a shareholder society. But as many Livewire readers - particularly parents - know, there are flaws.

Super doesn’t begin until formal employment, meaning kids can go nearly two decades without seeing investing in their own name. Access is locked away until age 60, reinforcing the perception that “it’s not really my money.” And at a practical level, the system is complex - layered with administration, investment fees and tax rules that make early engagement difficult.

Outside super, the options are limited. Education bonds are obscure and costly, and the tax treatment of adults investing on behalf of children is punitive. The result is a system that talks about starting early, but does very little to make that easy in practice.

The adviser reality check

Charlie Viola, Executive Chair and Adviser at Viola Private Wealth, likes the concept of Trump Accounts but is sceptical about how a similar scheme would work in Australia - particularly the risk of abuse.

“Giving people free money doesn’t really work,” he says. “It will get abused, taken by parents, or end up in regulated schemes where fees are high.”

Viola also questions whether financial literacy can be engineered through balance sheets alone.

“I think financial literacy belongs in the regular curriculum; from Year 7 or 8. Let's teach people what retirement savings are, teach them that if you retire at 65 with $X, you can only spend $Y a year or it runs out," he says.

Still, he sees merit in one design feature.

“I like the idea that it’s a forced investment back into the market,” Viola says. “If we were to do it, I’d mandate it be invested in a domestic index, so kids learn they’re part-owners of the companies that employ their parents.”

Unintended consequences

Any implementation would also need to be sensitive to the risk of worsening inequality. 

Trump Accounts allow parents and others to contribute up to $5,000 per year, which, as the think-tank Urban Institute points out, largely benefits wealthier families with the capacity to contribute consistently.

If every child ends up with US$40,000–50,000 by early adulthood - and those funds are directed toward housing and education - living costs could rise further as demand increases.

There’s also a broader market risk. Mandating steady flows into equity index funds could contribute to asset prices rising faster than underlying earnings growth, particularly if economic growth remains subdued.

“The Trump Accounts proposal risks stock price growth decoupling from earnings growth,” the Urban Institute warns. 

“This type of asset-price inflation can amplify wealth inequality because stocks are mostly held by wealthy people.”

A middle ground?

These are fair concerns. But doing nothing isn’t an ideal solution either - particularly given the trajectory of living costs. As ETF Shares’ David Tuckwell recently noted, private school fees in Sydney and Melbourne are heading toward $200,000 per year.

With the launch of Trump Accounts, Australia now looks like a laggard in policy imagination, lacking any meaningful mechanism to engage kids - and their parents - with investing early in life.

We don’t need to replicate the US model or hand out taxpayer money indiscriminately. But with the depth of our capital markets, the growth of ETFs, and the sophistication of our financial system, it’s hard to argue that Australia lacks the tools.

What we seem to lack is leadership, and a willingness to accept that if we don’t design a better starting point, the gaps we keep talking about will only widen.

Should the government launch "Albo Accounts" or a type of youth super saver scheme? Let us know below.