The Donohoe bulletin

Issue 3: The Most Valuable Benefit of Life Insurance for Children

The Most Valuable Benefit of Life Insurance for Children "Just use the debit card," my daughter Meghan said to my wife. Like every kid, my children weren't born understanding the concept of money. To them, you swipe a card here and you swipe a card there and stuff becomes yours. "Just use the card" was a common phrase on Target runs and trips to the grocery store. Time flies. I have one child in high school, one in middle school, and one in Kindergarten. My kids, even the youngest, are at an age where they now understand what money is. More importantly, they're starting to grasp its value, which is not in the money itself but in what creates it. Things don't show up just from swiping a card. They aren't valued at a dollar amount. They're valued in nights of babysitting jobs, chores around the house, and helping dad at the office. There are many ways to teach children the value of money, but a Wealth Maximization Account is designed with specific characteristics to benefit your children, both now and in the future, and can be an asset for the entire family. The Value of Life Insurance for Children Opening up a Wealth Maximization Account (a whole life policy designed for high cash value) on your children or grandchildren is an incredible way to set them up for a secure financial future. But the life insurance policy itself isn't what changes your child's life, it's the education behind it. Using a whole life insurance policy for children to teach them the value of money is a priceless gift. This gift to a child or grandchild is more than the cash value of an inheritance or trust fund. It's not about giving them money, although you can certainly use it that way if you wish. I use my children's life insurance policies to teach them the difference between wants and needs, the difference between good debt and bad debt, and to help them understand their intrinsic financial value. Do children have an economic value? They absolutely do. Their potential is like a seed, ready to be nurtured and cultivated. To maximize their value as an adult, they have to learn financial responsibility at an early age. One of the most effective ways I've been able to teach sound financial practices is by letting my kids borrow against the cash value of their Wealth Maximization Accounts. It allows me to show them the economic value of their life, as well as the unique way they can use it to make purchases. Family Banking Strategy for Kids A Wealth Maximization Account is unique in that it allows you to borrow against its cash value while still earning guaranteed interest on the full cash value amount of the policy. You, the parent, own and control your child's life insurance policy. You're the "bank" and can allow your child to take a loan from their policy, while the actual interest in the policy itself remains protected. Now, when my kids want things, my wife and I decide if we'll let them borrow from their policies, and it becomes their responsibility to pay it back. We call it our family bank. Our children have the opportunity to make purchases that are of value to them, but they must assume responsibility for paying back the loan. It forces them to weigh the value of their time and commit to a payment schedule. My daughter Meghan has used her policy to buy various types of electronics and a $400 gymnastics mat, amounting to thousands of dollars cumulatively. She had to create a payback plan before she could borrow the money. She felt she could earn enough for the payments by increasing the amount of babysitting she did in the neighborhood. She also researched ways to earn bigger tips by giving better service, such as making little videos of the kids, making sure the house was cleaner than when the parents left, and leaving a handwritten note. This experience has given Meghan an appreciation for where money comes from, what a loan is, and what interest is, all of which will benefit her in the future. Meghan is also learning the value of her time; an enormous lesson when it comes to her lifelong earning potential. The educational aspect of a Wealth Maximization Account is the most valuable benefit of life insurance for children. What If My Child Doesn't Pay Back Their Loan? Failure is part of the process. When it comes to teaching children financial responsibility, failure to repay a loan can actually provide a more powerful learning opportunity. As parents and the policy's owners, we "repossess" what they bought, whether it be a phone, iPad, bike, or toy. It's far


Issue 1: The Life Insurance Loan

After more than 10 years advising clients on the Perpetual Wealth Strategy, there’s one thing we continue to hear more than anything else:


Issue 2: What Life Insurance Brings to a Financial Portfolio

During a client meeting a few months ago, I asked the savvy investor I was meeting with about what initially brought him to Paradigm Life.