Suze Orman: 'Never turn down free money,' but Trump Accounts can still be a bad idea

There’s nothing wrong with that, said Orman, who added “You should never turn down free money.” But when it comes to parental contributions to those accounts, it’s not the right move for some households.

Setting family priorities

It’s a natural parental instinct to want to help set your child up for their future. And the law allows up to $5,000 a year to be contributed to a Trump account, including any employer contribution. But the pressure to invest in your child can make you ignore some very real-world issues.

Orman says any parent or grandparent who has credit card, student loan or car payment debt should focus on paying off those bills before they think about putting their money into a Trump Account. Additionally, if your emergency savings fund won’t cover at least eight months of expenses, you should be adding to that.

Even if you have a safety net and aren’t burdened by debts of your own, your own retirement savings needs to be on track. If not, you should prioritize yourself before investing for your child. While that might seem selfish to some, ultimately, it’s a bigger gift to your child.

“You owe your child the security of knowing they will not need to step in and support you 20, 30, 40 years from now,” said Orman.

Alternative investments

While Trump Accounts will supply some free money for newborns, they’re available for any children. That doesn’t mean they’re the right option, though, said Orman.

If you’re the parent of a teenager who has a job that earns them a paycheck, for instance, a Roth IRA could be the smarter choice.