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Whole Life Insurance as an Alternative to an RESP

Written by Shelter Bay

Whole Life Insurance as an Alternative to an RESPWhole Life Insurance as an Alternative to an RESP

Parenthood is the best part of life. Children are amazing, and dynamic! This is why we make them a top priority when it comes to financial planning. We want them to have every opportunity they possible can, and this includes post-secondary education.

However, education is expensive, so the quicker you begin to save for it, the quicker you’ll be able to set a solid foundation for your children.

More than likely, you want them to go to university or college, but will he or she want to when they grow up? This is a question you have to ask yourself because children have a mind of their own and since you don’t know what they’ll be like later in life, it’s hard to picture their future.

So let’s look at two financial planning options for you and your children – Registered Education Savings Plan (RESP) and permanent whole life insurance.

Registered Education Savings Plan (RESP)

An RESP is a way to save for your child’s post-secondary education with support through grants from the government. Contributions are made with after tax dollars and investment growth is sheltered from tax until withdrawn by the beneficiary. Plans can be set up for one child or all children of a family unit.

The limitation of an RESP is that the money must be used for post secondary education by a certain age but what if your child grows up to be a successful entrepreneur and doesn’t feel the need to go to college? Or maybe they’ll want to travel the world, donating time and skills to re-building cities destroyed by natural disasters.

Or what is your child wants to be a lawyer or a doctor? Will the amount of the RESP be enough to cover that cost ($50,000 lifetime contribution limit)? Thus, an RESP doesn’t give you many financial options and hinges on your child going to college or university.

Whole Life Insurance for Your Child’s Education

There is virtually no limit to the size of a cash value whole life policy…and most importantly, no limits to what the cash value or a ‘policy loan’ can be used for. Once a cash value life insurance policy is ‘paid up’ (typically 15 – 20 years) the values grow each year and vest permanently to the contract.

There is very little volatility, in fact, most whole life accounts have roughly 1/10 the volatility (standard deviation) of an equity investment.

Your child could use the cash value to pay for:

  • University, College or Post Secondary Training
  • To start a business (like Walt Disney)
  • For purchasing their first home
  • As a pillar of their retirement income
  • As a wealth creation tool for their children and grandchildren
  • Or whatever else they need it for

The policy owner controls how the policy cash values are used and who the beneficiary is so the money can’t be used without the owners permission and approval. There is no age limit on when control of a policy can be transferred to the insured – or the insureds parent for grandparents wanting to leave a legacy gift.

There is a lot more flexibility in using a cash value whole life insurance policy as an alternative for an RESP and gives you and your child a lot more options in the future.

For more information about using a whole life insurance policy as an alternative for an RESP, please call us directly at 1.888.498.5288.

Shelter Bay Financial Corp
Shelter Bay Financial Corp

Life & Health Insurance brokers working for Canadians

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