Creating wealth for children
Rule of 72
Starting time of investment
Private or public school
Private/public college degree or not?
Dividend reinvestment plan (DRIP or DRP)
Endowment: Colleges & universities
Real life and hypothetical example
Creating wealth for children
Reverse application of POC
Can POC fail?
Salt, sugar, fat & diary free
Zero and nearly zero calorie foods
Zero or low calorie, and other groceries from Amazon.
Zero or low calorie and fat free groceries from Walmart
Zero calorie drinks from Walmart


Ideally, parents would want to start the investment process for their children before the children are born. Once the children are old enough to understand the meaning of making investments, parents/schools would then teach their children about the concept of POC. Parents may reinforce the learning process by giving their children "salaried" jobs for performing various chores around the house, and then instruct the children on how to contribute a portion of their earning to an investment portfolio.

Generally, no taxes are owed on the income paid to the children because the amount of money is usually small. Under some circumstances, the income paid may be tax deductible for the parents, such as having a home office. Parents may wish to consult with an accountant about the requirements for taking a home office deduction. Parents may decide to gift stock to their children through a Dividend Reinvestment Plan

(DRIP or DRR), with the option for the children to buy more stock. A DRIP insures that all the dividends will be reinvested, thus increasing the number of the stock (in addition to any future stock appreciation).

Any money earned by the children e.g. doing some chore or working in family business or delivering newspapers or anything else can be invested in the Roth IRA and other tax free investments. This money in the Roth IRA or in other investments can be used for future college education. However, one should consider this as retirement fund (discussed below) for the child rather than college fund. Use college expenses from other sources.

Child Tax Returns: A minor child, whose income totals more than $900, usually must file a tax return. The first $900 of unearned income child does pay no tax. A tax is applied on next $900 at his or her own tax rate.

KIDDIE TAX: If a child under age 18, receives an annual unearned income of more than

$1,800 will be liable for tax on amounts in excess of $1,800 at the parent taxpayer’s maximum marginal tax rate. Please seek advice from your accountant.

What is the Retirement InCome – for Everyone Trust®?


The Retirement InCome - for Everyone Trust® (called the RIC-E Trust® for short, pronounced RICKY) is a way for parents, grandparents and others to help ensure that a child they love can enjoy a financially secure retirement. The idea is to let you set aside money until the child's retirement and have that money grow without taxes, even for decades."

RIC-E Trust (RICKY) is the brain child of the financial advisor Ric Edelman. He established the trust in 1998. There are few criteria need to be met.

The child will need a Social Security number and a US address. The trust is recognized in every state of US. The trust will accept additional contribution in amount of $500 or more from any person at any time. The trust is irrevocable and once money is contributed, the money can not be taken back or undo any aspect of the trust. The earliest age the money can be withdrawn from the trust by the child is age 591/2 unless becomes disabled. The trustee can then distribute the money from the trust because of disability and for no other reason/s. When the child reaches the retirement age, the assets can be transferred from the trust to him or her without any restriction. The tax rate will be the tax rate at the time of distribution. Money will be taxed as the money is withdrawn partially or fully. The money can be left in the trust to continue to defer tax.

$5000 is the minimum amount required to establish trust.

Anyone can establish the trust for any child including adult children of any age, those in college or newly married.

Investment results vary, of course, but one thing is clear: If one pays taxes on each year's earnings, one'll end up with much less than if one can avoid taxes annually.

Tax deferral and as well as reinvestment of all dividends and interests are powerful tools that can help the assets in the trust to grow faster than they would in a comparable investment fund that is annually taxed and or dividends are not reinvested.

Ric Edelman will be the financial advisor for the trust unless some one else is selected.

The Alternatives to the RICKY trust can be found at the site below.


One should consult an attorney or tax advisor before establish a RICKY Trust. Detail information can be found at the reference below including how to set the trust.

Reference: Introducing the Retirement InCome for Everyone Trust®? http://www.ricetrust.com/q.asp

" For administrative questions you might have regarding the RIC-E Trust®, contact Edelman

Business Services LLC at 888-PLAN-RIC."

Edelman Business Services LLC at 888-PLAN-RIC."

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