Canada and the U.S. are giving children money to build savings. But the rules on keeping it are very different

Source: The Conversation – Canada

Canada and the United States are both taking steps to help children build financial assets early in life, but they differ on what happens when those children reach adulthood.

This month, the U.S. Treasury began automatically opening Trump Accounts for eligible American children. Children born between 2025 and 2028 can receive a one-time US$1,000 federal contribution invested in the stock market, though a parent or guardian must still claim it.

Beginning in 2028, Canada will automatically open registered education savings plans (RESPs) for eligible children from low-income families to help them receive the Canada Learning Bond, worth up to $2,000 without family contributions.

But there is a crucial difference: Americans can keep their money invested for retirement, while Canadians who do not pursue eligible post-secondary education must return their Learning Bond to the government.

When families must sign up for these programs, children who need help most often miss out. However, getting money into an account is only half the challenge. Beneficiaries must also be allowed to keep it.

Canada’s savings gap

Canada’s education savings system has two main components. The Canada Education Savings Grant matches 20 per cent of family contributions to an RESP, up to $500 a year.

Because families must contribute their own money to receive the grant, the benefits tend to favour those who can afford to save. Government evaluations have found the benefits usually tilt toward higher-income households.

To address this gap, Ottawa introduced the Canada Learning Bond in 2004. It provides $500 in the first year of eligibility and $100 for each subsequent eligible year, up to $2,000. Families need not contribute their own money.

Trump Accounts, created under the One Big Beautiful Bill Act, take a different approach. The account belongs to the child, but must be administered by a parent or guardian until age 18.

The problem with enrolment

Canada’s record on access to the Canada Learning Bond is sobering. According to Employment and Social Development Canada, only 43.9 per cent of eligible children had received it by the end of 2025.

Although the bond requires no family contributions, claiming it has traditionally meant opening an RESP through a financial institution. This administrative hurdle can be particularly burdensome for low-income families, who may face additional challenges in obtaining identification documents, navigating unfamiliar financial procedures and accessing participating financial institutions.

Beginning in April 2028, the Canadian government will automatically open an RESP for eligible children born in 2024 or later who do not have one by age four. The Canada Learning Bond will be deposited directly.

Caregivers of eligible older children will also be able to request an automatically opened RESP. The government is extending the age limit for retroactively claiming the bond from 20 to 30.

The U.S. faces a similar challenge. By late July, only about 5.6 million of the estimated 73.4 million eligible children — about eight per cent — had opened Trump Accounts. The U.S. Treasury had estimated approximately 50 per cent participation under an opt-in system, drawing partly on Maine’s Alfond Grant program, where opt-in enrolment reached about 40 per cent.

On Oct. 1, the treasury announced it had completed automatic enrolment for eligible children under 18 with valid Social Security numbers. But parents or guardians must still claim the account to receive the contribution, meaning some accounts may remain unfunded.

Automatic enrolment doesn’t eliminate every access barrier. In Canada, eligibility for automatic enrolment depends in part on caregivers filing tax returns and qualifying for the Canada Child Benefit. In the U.S., a parent or guardian must still claim the child’s account to unlock the federal contribution, potentially leaving some children without funding.

What happens when children grow up?

The two systems differ most sharply in what happens when beneficiaries reach adulthood. In Canada, Learning Bond withdrawals for eligible education expenses are taxable to the student. In the United States, Trump Accounts generally follow traditional IRA rules after childhood, with taxation depending on the source of the funds and how withdrawals are used. However, if a beneficiary chooses not to enrol in a post-secondary program, the rules split.

Under the Canada Learning Bond program, the bond must be returned to the government if the beneficiary does not pursue eligible studies. Trump Account funds, by contrast, can remain invested until retirement.

The Canada Learning Bond is available only for low-income families, who are less likely to pursue higher education. Statistics Canada has found that in 2022, only 43 per cent of 19-year-olds from the lowest-income fifth of families were enrolled in post-secondary education. It is possible some may enrol later, but many may not.

Encouraging post-secondary education is worthwhile. A study of students in Florida found that those who narrowly met a university’s academic admission cutoff earned about 22 per cent more a decade later than otherwise similar students who narrowly missed it. The gains were largest for those from low-income families.

But there is little evidence that the threat of repayment changes whether a child enrols; it simply removes support from those who need it the most.

Neither country has the whole answer

Trump Accounts have important limitations of their own. The federal contribution is a one-time deposit, and relatively small. The program currently covers only four birth cohorts and a bill to make them permanent has not left committee.

In addition, until age 18, funds must remain invested in eligible U.S. stock index funds, limiting diversification. RESPs, by contrast, can hold a wider range of investments, including bonds and foreign stocks.

Private philanthropy has so far provided limited, one-off supplements to the Trump Accounts program.

Michael and Susan Dell, for example, pledged US$250 grants to children born between 2016 and 2024 who fall outside the birth cohorts eligible for the federal US$1,000 deposit. Employers can also contribute up to US$2,500 a year under the program’s tax rules, but the firms announcing contributions so far are primarily large financial companies.

In both countries, families able to save regularly can accumulate far more than those relying solely on public funding. Government contributions can give children a start, but cannot eliminate differences in family wealth.

Governments could do more to ensure their programs reach the children who need them most. Washington could make the federal US$1,000 contribution easier to claim or deposit it automatically when eligibility is established.

Ottawa, meanwhile, could continue encouraging post-secondary education while allowing unused Canada Learning Bond funds to remain with beneficiaries in a tax-advantaged account, rather than requiring repayment. The cost to the government would be modest. After accounting for repayments, Ottawa paid out about $187 million in Learning Bonds in 2025.

Young adults who do not go on to post-secondary education are often those with the fewest resources. So these funds may be the only financial asset with which they start adult life. A program intended to reduce inequality should not withdraw that support simply because a young person’s path does not include further education.

The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.

Original source: https://analysis1.mil-osi.com/2026/10/21/canada-and-the-u-s-are-giving-children-money-to-build-savings-but-the-rules-on-keeping-it-are-very-different/