How Trust Funds actually work

It’s a essentially a bank account with a babysitter.

Pretend we have three friends: Al, Bob, and Charlie.

• Al is rich and his parents give him lots of money.
• Bob is poor and his parents can’t afford to give him any money.
• Charlie is trustworthy; everyone knows Charlie would never steal a dime from his friends.

Al, being a VERY nice guy, decides he wants to help Bob out. So he decides that he’s going to take $50 he’s saved up and give it to Bob. However he’s worried about Bob. Bob has never had money before and if he gives him the $50 all at once, then Bob might blow it on stuff like candy and soda within a week, when what Bob really needs is lunch money for the rest of the school year. Al is also a little lazy. He doesn’t want to bother slowly handing the money out himself, so he decides to give the money to Charlie to dole it out for him.

This relationship is called a TRUST because Al TRUSTS Charlie to do what has been asked of him and not steal the money. The money is called a TRUST FUND, because it’s the whole point of the TRUST. So now everyone benefits: Al gets to be a good Samaritan without all the hard work, Bob gets money as he needs it, and even Charlie benefits because he’ll loan the money he hasn’t given out yet to other kids and they’ll pay him back with interest, which he’ll get to keep for himself!