Experts say while many consumers rely on Section 529 plans for saving for college, many may want to consider a cash value life insurance policy instead.
Students may only be eligible for a limited amount in financial aid if they have a substantial Section 529 account, said Bankrate.com, and their use is limited to school-related expenses. However, by putting their child's college savings in a cash value life insurance policy, they could use the money for anything they desire, said the report, allowing them the flexibility to put those funds elsewhere if they decide to take a nontraditional route to their post-secondary education.
Parents might also be able to maximize their return by investing more money into their cash value life insurance policy, said the report, since that normally yields larger returns. And, of course, a life insurance policy won't have as drastic implications on potential financial aid as a Section 529 account, said the source. Parents can mitigate the higher rate for life insurance by listing their child as the insured rather than the beneficiary.
Younger people can often find much cheaper rates on life insurance than older consumers, making it useful to buy a policy younger in one's life, experts say.