Our children are growing up. High School will soon be completed. What’s next? College? Now for the hard questions. Where? How much will it cost? Where will we get the money?
Some families have set up a savings account when their children were born. Others have opened a 529 savings account. A few families have a participating permanent whole life insurance policy from which they may “borrow” funds for college expenses.
What is the best option you ask.
Before discussing your options. Let’s talk about Investment vs savings.
An investment is always a risk, a gamble, an unknown. An investment may be money put into stocks or mutual funds or even a 529 College Savings plan. We invest with the HOPE for a financial gain. However, there are no guarantees!
Savings is when we have put money into a secure place and you know up front what the return or gain be. Your savings account at the bank states they will pay you a specific amount of interest.
College 529 Savings plans although the tax advantage is attractive. They do have some definite drawbacks. What if your child chooses not to go to college, wants to attend college in a different state, or is able to get scholarships to fund his or her education? Another point to be made is that the funds have to be used for education by the time the beneficiary (your child) turns thirty, to avoid the non-qualified use penalty. Also the government can change the rules of the 529 plan at any time.
The other viable option worth serious consideration is to purchase for your child a Participating Permanent Whole Life Policy. Why? There are several solid reasons which I will highlight here.
1. It is secure. It is not tied to the stock market.
2. This type of insurance is very low cost when purchased for children.
3. It has a guaranteed rate of return.
4. You may borrow from this policy cash to pay for college education without obligation to pay a set amount each month to replace that loan. The advantage of borrowing from “self”.
5. Most important is that you have full control over these funds and their availability to you.
6. Additional benefit is that you will get additional money from the death benefit.
My advise is to consult with financial adviser and consider all your options.
It is my opinion that using your child’s life insurance policy to fund College is a wise decision.