Guest Post: TrustEgg: Simple Saving for a Brighter Future

Editor’s note: This post was authored by Jeffrey Brice and Eric Genrich of TrustEgg.  Jeff is the Founder/CEO of TrustEgg and a former accountant working in Banking and Trust. He is an expert in children’s savings plans, and created TrustEgg to help save for his nieces’ futures. Eric is TrustEgg’s Policy Advisor, a husband, father, and Wisconsin state legislator.

The importance of saving for a child’s future isn’t a new concept, and the available savings tools are almost as old. Although we know now that a child with savings in their name has a significantly greater chance of success, we’ve failed – in private industry and government – to do all we can to increase the savings of all children and families.

It’s true, if a family has the means and the access to expert information, the options are out there: 529s are complicated and dedicated just to college, Coverdells have limits, basic savings accounts have almost no rate of return, and trusts are just out of reach of most families. There are barriers to all of these products. Parents want to save for their children, but they need an option that’s rewarding, easy to use and easy to share with friends and family. 

To provide a solution to that problem, we’ve developed TrustEgg. With TrustEgg a parent, grandparent, or family friend can open a trust account for a child with no up-front fees, no account minimums and a streamlined enrollment process. With these attributes, we believe we’ve removed some of the greatest barriers facing parents – and savings in general. In addition, because we’ve created one of the first social savings vehicles in this landscape, we hope parents of all means will be able to tap into their network of friends and family members to invest in their children’s futures.

At the same time, we have great respect for the advocacy and policy innovations advanced by the New America Foundation and their allies at the Corporation for Enterprise Development. These organizations understand, as we do, that policy changes need to be made at the federal, state and local levels to make savings available to all children.

Examples of constructive policy innovations might include an expansion of the Kiddie Tax Exemption.  Right now every child can earn up to $1,000 per year of investment income tax free. There’s no reason to cap children’s investment earnings at a rate lower than 529 plans. Depending on the state, a 529 plan allows tax free growth on balances as large as $200k-$300k+. This probably isn’t the incentive the government had in mind. Increasing the Kiddie Tax Exemption is a great way to allow families of all income levels to maximize their ability to save for a child’s future.

As the New America Foundation has often pointed out,  the federal Saver’s Credit could be strengthened and expanded to better appeal to families with modest incomes. In concert with the reforms proposed by New America, we support the inclusion of Universal Transfer to MAs in the list of eligible savings vehicles. The current restriction that limits the credit to investments in 401(k)s and IRAs is significant detriment to families who are interested in saving for retirement and a child’s future needs.

It goes without saying that these proposals are little more than aspirational at this point, given the current inability of lawmakers in Washington to enact major policy reforms, but we believe it’s important to keep pushing to knock down barriers and open doors to saving, so that more families and children can achieve their goals.