Money: Give your kids a financial head–start

(NC) -- Experts estimate that it costs close to $200,000 to raise a child from birth to age 18, not counting post–secondary education. So when a new child joins a family, parents and grand-parents tend to think about starting an education fund like a Registered Education Savings Plan. While this is a very practical way to help the child get a head–start in life, it's a tactic that's limited to their education years. To find out if there are other long–term options to help get kids on the right financial path well into their adulthood, we spoke with financial expert Reh Bhanji from Desjardins Insurance.

What would you suggest as another long–term savings product for children?

One option is a life insurance policy that the parents, grand-parents or another friend or family member purchase for the child. The child will then be protected for his/her entire life and can take advantage of an added savings component that is tax exempt.

Your suggestion of a life insurance for a child is very unusual—

Yes, that's true. However, it's the built–in savings component, not necessarily the death benefit, that makes this an attractive solution.

How does it work?

The insurance policy is purchased by the parents etc., on behalf of the child. And the premium is determined by the child's age, health and other details. This amount remains level over a set number of years and never increases. Part of the premiums accumulate in a separate, tax–sheltered account and over time a portion of the cash value can be used to pay the policy premiums.

What happens when they've grown up?

When the child reaches the age of majority, the policy ownership can be transferred to them and continues to protect them for life. At this point, all the premiums may have been paid. What's great about this insurance is that it provides the child with a head–start on life. For example, the policy can be used as collateral when applying for a loan. Also, the child may have the option of purchasing more insurance without a medical review. This is called a Guaranteed Insurability Benefit.

Can they access the cash value?

Yes, as the child grew so did the cash value. It's accessible at any time and is subject to the available amount. The child can use it towards post–secondary education, travel, as an emergency fund or as a down payment on a home.

Where can I find more information about the benefits of this type of insurance?

Speak to your life insurance representative or financial advisor who can offer you tips that best suit your situation. Or for more immediate answers, visit Desjardins Insurance at


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