Is Buying Life Insurance for Children Actually Worth it in 2025?

Life insurance because we recommend it to all of our clients with kids. And we don’t just recommend it, we use it, right? So, both of our kids, Tyler of course, 13, Caleb is 14, they both have juvenile life insurance policies. And

when we talk about that at dinner parties, it comes across as morbid, right? Like, why would you ever buy life insurance for a kid? And the answer is really simple because they’re young and it’s super inexpensive. So,

I came across this yesterday and while I was looking at some of the information on juvenile life policies, I love the way that this illustrates out the power of buying life insurance young. So, you can buy life insurance for your kids, you can buy life insurance for your grandkids, and it

can serve a whole host of purposes other than just if someone were to pass away, right? So, if we look at buying life insurance for a one-year-old, which is phenomenal, right? You can buy life insurance at 15 days. Again, the sooner you buy it, the lower it costs, right? So, if you bought it for a one-year-old and let’s say

that you were aggressive and you funded it with $250, well, when they go to college, there’s going to be $70,000 sitting in cash value for use for college, right? So, a lot of people will use juvenile life insurance policy or kiddo policies to help fund college, right? Because it grows taxree and it borrows taxree.

Talk to your tax advisor. So, you have that benefit there of um really aggressively growing it. Even if you did $100 a month, you’d have $25,000 at age 18. Even if you did $50 a month, you’d have $9,881 at 15. But let’s look a little further down the road. So, let’s say we stay aggressive because I believe in being

aggressive. You funded it with $250, right? So, you make those contributions to that policy so that it can grow in that investment bucket. when they graduate, there’s $103,000. But hey, let’s not touch it yet, right? You just graduated college. You don’t have a family. Uh you don’t hopefully have much or any student debt. And

so, let’s keep moving. Let’s let it keep working for us. So, now at age 30, we are getting ready to get married. We’re getting ready to buy a house. We have $23,000. And guys, I work with a lot of realtors and I work with a lot of lenders. And one of the biggest complaints right now is

people are unable to buy homes because they’re unaffordable and rates are too high and they just don’t have the money for the down payment. I’ll tell you there’s a lot of different programs out there to help and that there really are. But even on top of all of that,

imagine walking in and enabling your kid or your grandkid to walk into a home and say, “Hey, I’ve got $23,000 to put down on this home.” home. Imagine what a head start you’ve provided them in life. Right now, let’s wait until you’re John Powell and you’re 40 years old and you think about starting a

business. So, I was eight. So, I was two years ahead of the curve, I guess. But I was 38. Imagine starting a business with $435,000 because when you start a business, no one wants to give you money, right? You got to go into a lot of credit card debt. You got to have

a fat savings account or you better have some equity in that home so that you can borrow against the home equity in a line of credit because aside from that, startup capital is near impossible to find. Very, very difficult. As most of you know, that’s what I did was business lending for a majority of my

career before coming into financial services. So, really difficult. So, imagine having $435,000 of seed money to finance your dream of small business ownership. But wait, there’s more. If we didn’t take any distributions before and we waited and we

utilized this as a retirement savings account, you know, we’d have at age 66 the ability to pull out $221,000 a year. Yes, you heard me correctly. Annual distribution at age 66 if no previous distributions were taken, $221,000 a year. That’s insane. And after 20 years, this policy would have kicked out $4.4 million. $4.4

million to enable your kids, your grandkids, your kids’ kids, which if your parents would be your grandkids, to to have a better life, right? To have the opportunity to leverage one of the biggest tools that the rich use to help with

their taxation, to help with their growth of their money. Right? So, it’s a phenomenal tool. Let’s say that you’re me and you wait till they’re 10. Like I said, Caleb’s 14, Tyler’s 13. We got theirs probably about three years ago. They have two policies and so each one’s funded with 125. So, I’m going to go with the $100 policy option

here. But remember, it’s times two. But at 18, $7,600. After graduating, they’re going to have 14,000. They’ll have $33,000 at that marriage and mortgage time frame. If they wanted to start a business down the road, they’d have about $80,000. And if they started uh retirement distributions at the ripe age of 66,

which I don’t know anybody that can retire at 66 except for the kid up top that started life insurance policy at one, $42,000 a year with total distributions of $840,000. But I would like to point out why I’m going to combine the two policies into one policy. Because at the $250,000 level, that number goes or excuse me, the $250 per month level, my apologies, for

$250 per month, it goes from $42,000 a year to $118,000 a year just by allocating an extra $125 a month. Right? So that’s the power of permanent life insurance in general, right? It generally grows taxree. You can borrow from it taxree. It’s guaranteed not to lose value. So the floor is zero. There’s typically a ceiling that’s about 12 and a half, but you have a lot of of growth inside of there, but because you have

that floor of zero and the market goes down, the money inside of your account doesn’t go down. So, that’s phenomenal. And life insurance, all things being considered, the younger you are, the less expensive it is. So, I just wanted to do this really quick because we’re getting into that time where folks are, you know, freeing up a little bit of time going into

the summer. And I think this is critical, right? the the sooner we buy this, god forbid your kiddos get some condition that makes them uninsurable down the road, whether that be as a kid or whether that be as an adult, locking in the ability to own life insurance, right? Insuring their insurability is the number one reason that I do it. That that’s the number one reason

because I’ve been around burn pits. I have a combi inhaler, right? There’s a lot of stuff that’s gone on in my life and my insurance if insurable is going to cost a lot more than somebody who hasn’t been overseas and hasn’t been around burn pits. So, you know, those things happen in life. So, ensuring insurability is the number one reason that I

recommend life insurance policies for kiddos. That said, a lot of people just don’t see that argument because it hasn’t happened to them. So, let’s look at the financial benefits of it. Let’s look at what life insurance can do with a financial vehicle that’s going to grow taxree and borrow taxree and then pass taxree down the road to whoever those beneficiaries may be in the far far far future. So, hope this was helpful. Please let me know if you have any questions. It’s genuinely why

we’re here is to help and to make sure that you understand what your options are because I don’t believe that as financial professionals, we help people understand what’s available to them enough.