Insure Your Childs Future

You can change your entire financial outlook and the financial outlook of your children with one simple plan now that will make a big difference in the future and may help them make their own down payment.

Why do the rich get richer and the poor stay poor? The answer to that question is simple. First, the rich teach their children about money; how to earn it, manage it, and how to be responsible with their credit. The wealthy also stash money into savings and investment programs that get their children started on the right foot financially. Second, the rich are well insured, so when an unexpected death or financial trouble occurs, they do not leave their family with lots of debt and no income.

You can change your entire financial outlook and the financial outlook of your children with one simple plan now that will make a big difference in the future and make help them make a down payment on a house, one day.

One Simple Idea

With one single plan, you’ll enjoy all the following benefits:

· You as the parent or grandparent will remain in control of the money until you decide otherwise.
· The money will grow in a safe and tax-deferred account until needed.
· The plan will be affordable and may involve only a shift of the money you already put away for your children in a savings account or give as cash gifts on birthdays.
· Best of all, it can get your kids started on the right path in life…at least financially.

I have heard many parents say, “We don’t want to make our kids rich without their having to work for it.” I agree with part of that statement. Your kids should have to work for their money, but why not make them wealthy, or at least better off? When I question parents further, I find they aren’t worried about making their kids wealthy; they’re worried about their kids becoming “trust-fund babies” and being spoiled or irresponsible.

I’m not recommending that you invest a ton of money for your kids so they don’t have to work and can live off the fat of their trust funds. What I am recommending is that you prepare your children financially, while teaching them fiscal responsibility. If you teach your children to be responsible with money, that knowledge will not make them bad, greedy, or lazy, and you will not feel like a bad parent for giving them too much. In fact the opposite is true, If more children were educated about money, the pro’s and con’s about credit, and the value of charitable giving and were given a slight leg up financially, we could change the entire economic structure of this country and even the world. Sound a bit lofty? It may take a couple generations, but where might we be today if such an economic plan had been started two decades ago? Imagine.

Instill Values, Rather than Tossing Them Money

Although the concern that your children might grow up spoiled or irresponsible is legitimate, the main issue is not how much money you give them while you’re alive or leave them when you die; it’s a matter of the values you instill in them as parents. You need to educate them about money, not just hand it over. Teach them the value of a dollar, and even better, the value of a dollar well earned. Teach them the importance of giving and also about proper saving. Teaching your children about money is just as important as teaching your kids how to walk, talk, and read. You should also impart the importance of a healthy credit score and how to keep it a high number, in the mid 700s or better.

Where Do Children Learn Fiscal Responsibility?

Parents have been saying forever, “We want what’s best for our children.” Parents also say they hope their children will grow up to be better off than they are. Although these statements are true and said with love, it’s important to know that your kids will not learn to manage money or the value of money in high school or college; they will learn about money by watching you and following your lead. Take a good look at your own habits and beliefs about money. If you’re a good saver and make smart financial decisions, chances are good your children will, too; but if you think credit cards are like a license to shop, whether you can afford to or not, guess what…monkey see, monkey do. Don’t blame yourself if you are less than fiscally responsible; chances are you learned your financial habits by watching your parents, as well. You need to have good habits yourself and a general education about money and credit, and then pass that education on to your children while they are young.

How do you get that education, if no one ever taught you? Easy; either work with a financial professional or, if you are a do-it-yourselfer, head to your local library or bookstore or even surf the Internet from home. Here is a quick list of books, magazines, and Web sites to get you started:
· Secrets of a Millionaire Mind, by T. Harv Eker
· Rich Dad, Poor Dad, by Robert Kiasoki
· Think and Grow Rich, by Napoleon Hill
· The First-Time HomeBuyer magazine
· Fortune magazine
· www.Morningstar.com
· www.MotleyFool.com
There are many more. It’s easy nowadays to get educated on virtually anything; just read twenty minutes a day about saving, investing, planning, etc., and in a year you’ll be better educated on money matters than 80% of Americans.

Get Professional Guidance

A financial professional will help you sort through what is valuable, or at least valuable to you. Two tips:

1. Financial professionals are not only for wealthy people. Plenty of my clients are hard-working Americans earning an average income.
2. Interview a few professionals and find one you like. The planner should you ask a lot of questions and care more about your goals and concerns than about how much money you have or what products he or she can offer you.
A few simple and affordable plans will help you improve the financial future of your children without placing the proverbial silver spoon in their mouths. Close your eyes and consider how nice it would be if your parents not only taught you fiscal responsibility but also started a savings/insurance policy for you when you were born, a cushion you could tap into for the down payment on your first home. What if that same savings/insurance plan covered the remaining debt on the house if you should die prematurely? How much better off would our children be or even our entire economy, if every parent took care of such basics? We would certainly start to close the gap between the haves and have-nots.

The idea I am referring to is not a new one; in fact most parents who are doing it for their kids are doing so because it was done for them. The idea is to purchase a permanent cash value life insurance policy for your children. Such a policy is a great alternative if you’re already dumping money into a low-interest savings account for your child or if you or the grandparents are handing over cash gifts on birthdays and holidays.

One Policy Can Insure the Future

Some of the living benefits of a permanent cash value life insurance policy, just to name a few, include the following:
· The parents remain in control of the policy until they decide the child is ready, rather than it going into the child’s name automatically at age eighteen (or the age of majority for your state)
· Tax-deferred growth in the cash value portion of the policy (and withdrawn tax free in some circumstances)
· A safe and reasonable rate of return outside of the stock market
· Access to the funds through loans and possibly withdrawals before the age of 59 ½
· Affordable when purchased at a young age
· Protects insurability and pays dividends
Participating permanent life insurance policies are eligible to pay out dividends to policyholders. This concept is separate from “buy term, invest the difference.” When declared, dividends are paid on each eligible participating policy’s anniversary date. One of the many living benefits of dividends is that they can be left in the policy to earn interest. You can even use them to purchase additional insurance coverage within your policy, which generates its own cash value and is eligible for dividends also, all without having to provide evidence of insurability. Because you have a choice in how to use your dividends, you can also opt to receive them as cash payments, which can create a supplemental income stream or a lump sum for the down payment on a home. Dividends are a return of premium, and thus generally do not create taxable income unless the total dividends exceed the premiums paid.

I had never realized the power of the insurance-policy concept until a couple years ago. A young man named Jonathan, about twenty-six years old, walked into my office. He mentioned that his father had purchased a life insurance policy on him when he was born, and he had some questions about it. Jonathan’s first question was how much cash was in the policy. His second question was, “How much can I take for the down payment on my first home?” After a little bit of research, I was excited to tell him that there was approximately $27,000.00 cash value in the policy and that he could take a loan for as much as 90% of it.

He filled out the paperwork, and we sent him a check for $24,000.00. Here is the cool part: as it turns out, Jonathan’s father was a doctor who emigrated from Japan thirty years earlier with little more than the clothes on his back. About four years later, just a little better off financially than when he arrived; he had a son and started the life insurance policy for him, hoping to provide a head start for him.

A few decades later, here was a young man who worked through medical school, and thanks to his father, who put aside about $1.50 a day--an amount about equal to the price of a cup of coffee--the son got a head start with the purchase of his first home. Also, the father taught his child financial responsibility, and the young man was sitting in my office getting more of a financial education and was certainly better off, as his father had intended. He was also ready to start the next chapter of his life in his first home and as a medical resident in Texas. What do you think the chances are he’ll do the same for his children?

Educate Yourself

Keep in mind there is a more to the mechanics and details of how to start this program for your child, which is why you should meet with a professional.
There are many great ideas that can help you help your children get a leg up financially as young adults. The insurance-policy concept could be positioned so that you do not give the policy to your child until he or she finishes college, for example. Because you’re in control, you make the rules.

No matter what, I cannot overstress the importance of having some general knowledge about money and credit, having good financial habits of your own, and passing that knowledge on to your kids while they are young. Success is not measured in the amount of money you pass on but in the values you pass along.

Note: Loans against your policy accrue interest and decrease the death benefit and cash value by the amount of the outstanding loan and interest.

Dallas M. Cyr is a Financial Services Professional with New York Life and NYLife Securities in Windsor, Connecticut. You may contact his office by phone at (860) 298-1033 or email at dcyr@ft.newyorklife.com
Copyright 2007 by EOTO Publishing

Copyright ©2007 First-Time HomeBuyer Magazine