What is the Million Dollar Baby Plan?
You just had a kid or a grand-kid and of course you want to give them the best opportunities and advantages in life.
Well, let us tell you about the Million Dollar Baby Plan.
What is the Million Dollar Baby Plan? Well, it’s a term we coined that sets up a long-term savings and wealth building plan for your kids that lines up with their life financial milestones like going to school, buying a house, starting a business, starting their own family, and eventually retiring.
The reason we call it million dollar baby is because if you do this with the right numbers it grows to give your kids or grand kids about a million dollars when they hit age 65 which is your traditional retirement age today.
The Million Dollar Baby Plan is a safe and secure savings plan for kids that grows with them and can be used for these major milestones. It’s an old concept that we’ve innovated to work for young parents and grandparents in Canada.
Today we’re going to explain how it works.
So what is the Million Dollar Baby Plan?
It’s a plan that builds a special type of insurance policy as a forever asset for your child or grand child.
It uses the same principles that we talk about in our other videos on the infinite banking concept, becoming your own bank, and the immediate financing arrangement which is to build up the asset inside the insurance policy and then leverage against the policy cash values when you want to spend it on big life milestones.
As a big bonus, setting this up when your kids or grandkids are young also gives them a base of insurance life insurance coverage that they will keep for their entire life.
What can you use the million dollar baby plan for?
Well, that’s entirely up to you.
As you deposit premiums into the policy it builds up the cash values that line up nicely with life milestones like university tuition, a down payment on a home, funds to start a business, money to pay for a wedding and a big chunk that’s available in retirement.
Along the way you can use this for whatever you want, but these are the general big things that our clients are doing for their kids and grand kids.
Now let’s talk about control – how does that work?
There are 3 parties on a life insurance contract – there’s the owner – which is the person who pays the premiums, there’s the life insured – which is the person if they pass away, the insurance pays out and there’s the beneficiary – this is the person who receives the life insurance proceeds if something happens to the life insured.
So you are the parent or grand parent and paying the premiums. This means you are the owner of the policy and you have total control of the policy.
No one else can do anything or make any changes to the policy or access the funds. Only you have any say. Parents and grand parents like this because they generally don’t want to give young kids a lot of money when they haven’t matured and aren’t in a position to manage the funds properly.
If the kids need the money, they can talk to you and you can get it for them.
In the future, when you feel they are financial mature and responsible enough, you can transfer the policy to them and then they will own it and have control. This can happen at any age – could be 20 or 25 or 30 or 40. Whatever you want.
We can even set it up to transfer to them automatically if you pass away.
All of this is done privately, with no tax consequence.
How does this million dollar baby plan compare to other savings plans that we set up for kids?
The main comparison is usually against an RESP Registered Education Savings Plan, and there are pros and cons to each.
The RESP is great because you get the 20% government matching. I mean it’s hard to beat a guaranteed 20% return so we generally tell people to go get that.
Another things that’s good about RESP is that most people have heard of them and they’re easy to understand. So if it’s grand parents or family giving money for the kids, it’s easy to tell them the money is going into the RESP – you don’t have to explain what’s going on.
You can also open an RESP at most major financial or investment institutions so they are simple and easily-accessible. Just make sure whoever’s setting it up for you knows what they are doing and submits the government grant forms for you.
We see people who don’t know what they’re doing, setting these things up all the time and not getting the government grants for the client.
But some cons – the RESP money can only be used for school, so if your kid doesn’t go to school, you lose a lot of the benefit.
Yes you can cash it out or transfer it into the parent’s RRSP without losing the principle (unless it’s one of those private scholarship plans which you should stay away from). But you will have to return the government grant money and on some plans you’ll lose some or all of the growth depending on the terms and conditions with that company.
Another negative is that when your child goes to school and uses the money, the money’s gone and you can’t use it for anything else in the future.
Ideally, if you have the means, you should probably do both – get the RESP free government money and also set up a Million Dollar Baby Plan using whole life insurance.
If you don’t have the means and need to pick one or the other to contribute to, then we would have to know your situation to advise you on which one is best. But you can always fill out the contact form below and we can meet to give you some advice about your options based on your life situation and your goals moving forward.
A generational legacy
There’s a generational legacy play here as well.
If family legacy and taking care of future generations is important to you, think of this. You just put a life insurance policy on your child or grand child.
What does that mean? It means that eventually, the death benefit is going to pay out to their beneficiary – which will probably be their kids – or your grand children or great grand children. You may not ever meet those kids, but the steps you take today will make sure a legacy pays out to them in the future.
This is the very definition of planting the seed for a tree that you may never sit under, but will be enjoyed by future generations.
When can you set this up?
The earlier, the better so you can take advantage of as much compounding as possible.
The technical answer is you can set up insurance for a child starting after 2 weeks old.
How much do you have to put in to make something like this work?
You can set this up for any amount, but we suggest a minimum of $100 monthly.
To hit the million dollar baby plan numbers takes a monthly deposit of $250 starting right away when the child is born. But we can run numbers for you based on your child’s age and budget.
We have some grand parents putting $1,000 per month into plans like this for their grand kids. You can go as high as you want.
Why haven’t you heard of the Million Dollar Baby plan before?
Really, it’s because it’s a name that we made up.
We’re not the first people to use a whole life insurance policy for kids; people have been doing this for years – they just never called it a Million Dollar Baby plan.
And why haven’t you heard about doing a strategy like this for your kids or grandkids?
Well, the majority of people you know don’t do this because they typically run their finances through banks and investment firms – and they don’t offer this so they’ll never tell you about it. To do this you have to go through an insurance company and most people don’t.
All in all, the Million Dollar Baby Plan is a no-brainer strategy to set up your child or grand child for life if you have the funds.
Contact & More Info
If you’re interested in seeing how this can work for you, fill out the contact form below and we will get back to you within 48hrs on business days to set up an appointment.
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