ArchivesWhy should I open a life policy for my five-year-old?

Why should I open a life policy for my five-year-old?

As we work from home, we tend to realize things that we never thought we had time for before. Juggling remote learning tasks with your little one while keeping up with your nine-to-five job can be quite overwhelming, but let’s be real here: now you have the time to go for a walk, to prepare for a four-course meal, or even to ShopBermuda because of government restrictions. So how about starting your child’s financial future? Have you begun an educational plan for your child? Now is the time to do so.

Planning for your child’s education is probably one of the most important goals you will ever have as a parent. College education can be an expensive prospect, likely ranking just below your house in terms of big-ticket items you’ll pay for in your lifetime. That’s why it’s so important to plan ahead for college expenses, just as you plan ahead for your retirement or a house.

Educational planning involves designing an investment strategy that addresses the educational needs of your family. Specifically, it involves forecasting what those needs will be and creating a plan to satisfy those needs.

Where do I start? How much will I need when my child turns 18? What college/university will they want to attend? How much does room and boarding cost? What if they don’t want to go to school? These are a few questions that parents tend to ask themselves when preparing a future fund for their child.

Now that you’ve made the decision to invest, the questions become: “How do I invest? What kind of plan or investment tool can I use that will help myself and my child achieve our goals?”

The following are a few things you should know about whole life policies for children: Life policy? Why should I consider a life policy for my five-year-old? Aren’t life policies for adults and used upon death? That is not correct; life policies can be used for many things, such as for education planning for children.

Start early

Whole life insurance isn’t typically at the forefront of one’s mind when it comes to saving for future education, but it can be used as part of a well-rounded funding plan.

Paying for expenses related to your child’s education can also be done through their own life insurance policy. What does that mean? As a parent, you can insure your child at a young age and then access the policy’s cash value later—similar to how you can access the cash value of your own policy. An advantage is that the younger and healthier the insured is, the lower the cost of the life insurance, which means that children are relatively inexpensive to insure. If you purchase a policy when your child is very young, it can accumulate value to help offset college expenses. In addition, you can lock in protection for the rest of your child’s life.

Be disciplined

Disciplined investing sounds nice on paper but is challenging to execute in the real world where market conditions change, incomes fluctuate, and personal needs and desires evolve. Having a life policy for your child can help with a few things. First, having the plan can help you budget your life priorities and give yourself a head start on a fund that will spare you future worry. Think of it as a bill with life-changing benefits. Parents budget for many bills on a monthly basis (such as for cellphones and internet); why not budget for your child’s future? Having something in place is not the same as putting aside funds in an individual bank account. The difference between a bank account and a life policy is that a bank account is visible. You can make withdrawals for anything, such as family vacations or even a new car. With a life policy, though, while the cash value is available, it reminds you that the plan is strictly for your child’s future. While it’s difficult to gain and lose money without feeling twinges of excitement and fear, you must insulate yourself against external factors. This will allow you to stay the course when positive and negative events happen.

Leave it there

Finally, one other question remains. What if my child doesn’t want to further their education? The answer is simple: leave the money there. The life policy will only expire when your child reaches the age of 105. If your child doesn’t want to pursue a career that requires further education, it’s okay. You have still started them with an investment that can be used for anything, such as a 21st birthday gift, a down payment for a dream house, or even the funds to establish a small business. Allowing the investment to grow can help your child build their own worth and family legacy.

In conclusion, starting saving and investing early will give you a head start for building up an education fund for your child. For more information on how to start planning, contact Jessica Maiato at Freisenbruch–Meyer today.


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