Grandparents can save for college by purchasing life insurance for their new grandchild. One advantage of purchasing a juvenile life insurance policy is that you can insure your grandchild as an adult. Regardless of your grandchild’s health, most juvenile policies guarantee adult coverage as long as the premium is paid. Many of these accrue monetary value over time.
According to recent studies, more than half of college graduates are still financially dependent on their parents two years after graduation. As many Baby Boomer parents assist their children and save for their own retirement, grandparents use life insurance to save for and plan for their grandchildren’s college education.
According to a Fidelity survey, grandparents have a median contribution of $25,000, with 35% expecting to contribute $50,000 or more. Ninety percent say they would contribute to their grandchild’s college savings fund if they were asked.
According to the study, many grandparents value a college education and see it as an important component in providing young people with the best chance of success. They also recognize that as the cost of college continues to rise, parents and grandchildren face a significant challenge in saving enough to cover costs and that their grandchildren may face a significant financial burden after graduation if they do not receive assistance.
“For many families, saving for college has become a team effort, and many grandparents aren’t content to sit on the sidelines,” said Keith Bernhardt, vice president of college planning at Fidelity.
“Contributions from grandparents – big or small – can add up over time and potentially open up a grandchild’s opportunities when making college decisions. Ongoing communication between parents and grandparents can help when determining how to grow their savings, as well as how to best leverage those savings to pay for college when the time comes.”
You are not required to name yourself as the beneficiary. Parents may benefit from their children.
While the grandchild is a minor, the policy is owned by the grandparents. When the child reaches the age of 21, you generally transfer ownership to the grandchild, though some policies allow exceptions. Some juvenile term insurance policies cover the child until the age of 25.
Although the policy will expire at a certain age, many life insurance companies will allow you to convert to a whole-life policy.