Many parents consider financial goals to benefit their children at major milestones, whether it’s the appearance of a first tooth, or the first day of school. No matter the time of year, it’s always a good time to resolve to put your child on the path to a stronger financial future.
SAVE FOR YOUR CHILD’S FUTURE
When it comes to planning for your child’s future, college planning is likely your first impulse. After all, education is viewed as the cornerstone of life’s financial path through adulthood. With college planning in mind, thoughts often turn to the 529 plan. However, while the 529 plan is a useful college savings tool, it’s not the only option available.
Other savings vehicles appropriate for your child may include IRAs (if earned income is involved), Coverdell accounts, and even regular custodial investment accounts or traditional savings accounts. What many parents overlook, though, is whole life insurance. While this strategy isn’t for everyone, it could help put in place building blocks to help build their child’s financial foundation.
CASH VALUE AND WHOLE LIFE INSURANCE
In addition to the primary death benefit, whole life insurance builds cash value over time, so as the years progress, whole life insurance can act as another cash accumulation vehicle.1 Cash accumulations can be accessed later in life, and they come with tax advantages.2,3 Purchasing a whole life policy on behalf of your child can help ensure that he or she is covered by life insurance later, which can be beneficial if circumstances arise in which your child is unable to qualify for affordable life insurance. As long as the premiums are paid up to date, the policy, once purchased, can’t be canceled and can benefit your child – and any future family of your child – for life.
Not only that, but there aren’t restrictions on the use of cash value from whole life insurance policies. A 529 plan comes with various restrictions. What if your child decides not to go to attend college? What if your child decides to start a business instead? If something happens to the 529 account holder (likely you), it can be messy to sort things out, and then your child may not have access to needed funds for some time, potentially setting back his or her progress.
Over time, cash value grows. Not only can this provide your child a retirement income supplement down the road, but it can also mean a higher death benefit. This helps to provide financial reassurance for their future as well as that of their dependents, which can’t be quantified in today’s dollars.
Whole life insurance cash value can be drawn on for any situation that might be needed for your child, from college to buying a home, to starting a business.2 Whole life insurance can be a great piece of the puzzle, inclusive and apart from 529s and IRAs. Whole life insurance cash value can help you set a course toward helping your child fulfill their hopes and dreams regardless of whether you’re around to see them come to fruition.
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2020-95676 Exp. 02/2022
1 Cash values grow from dividends. Dividends are not guaranteed. They are declared annually by Guardian’s Board of Directors.
2 Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income taxes.
3 Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.