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Q&A with Ric: Putting Aside Money for a Grandchild

Wednesday, 6 Feb 2008 | 3:03 PM ET
Ric Endelman
Ric Endelman

By Ric Edelman

Question: I would like to put aside some money for my 1 yr old grandchild, what can I invest in other then the 529 plan?
-Leisa from Ohio

Hi, Leisa,
It is very common for grandparents to want to set up investment accounts for grandchildren. In my new best-seller, I caution grandparents not to contribute to college savings plans for the grandkids. There are five reasons for this:

  1. There's no assurance the child will need the money. He might win scholarships - or might not go to college at all.
  2. You might not like the kid by then (or his parents!). By age eighteen, he might be a drug addict, a car thief or a high-school dropout. Oh, sure, not your grandchild - but this happens to someone's grandkids. Maybe yours.
  3. The parents might incur problems of their own - marital, job, economic - causing them to raid the account you've contributed to.
  4. You might discover that you need the money, for health care or whatever.
  5. You might get more grandchildren! Are you sure you'll be able to contribute equally to everyone?

So, it's better to leave the money in your name and when the time comes, if you have the money and the desire, you can pay some or all of the college costs at that time.

And there's another idea for you to consider: saving for your kids' and grandkids' retirement (rather than college). I invented the Retirement InCome - for Everyone Trust® and parents and grandparents have established more than 3,000 of these so far. The RIC-E Trust® has received two U.S. patents, making it quite unique. It's the only way that you can set money aside (at least $5,000) for a child as young as a newborn or as old as in their 50s - knowing that the money will remain untouched until the child reaches retirement age. There are no taxes until then, either! There is a one-time set-up fee of $300.

A one-time gift of $5,000 for a newborn can grow to $2.5 million by the time the child reaches retirement age - providing that child the gift of retirement security. It's something you might want to consider. For more information on the RIC-E Trust®, go to www.ricetrust.com.