What is the Million Dollar Baby Plan anyway?

It sounds pretty fancy, but what exactly is the Million Dollar Baby Savings Plan?

Million Dollar Baby is just a fancy way of referring to something that has been around for over 100 years, a “participating whole life insurance policy.” Sounds pretty boring doesn’t it?

Yes it is a life insurance policy on your child. Some people may think this is taboo, but purchasing a life insurance policy on a child is the safest investment you could ever make into your child’s future. These policies pay a dividend every year that gets deposited into the cash value of the policy. This dividend has fluctuated over the years from 12% to now 6.8% per year. The great thing is that once the dividend is deposited, it cannot be taken back. It allows the policy to grow and grow every year. By putting away only $200 a month for your child into this policy, you can essentially help fund your child’s retirement.

The growth in this investment is tax sheltered, and there is a way to use the funds in the policy to fund major purchases throughout your child’s life, such as a car, education, or a down payment on their first home.

This investment strategy will give your child equity starting at a very young age, which will give them options in the future. And it is a stable investment that virtually has no risk, but has much more growth capability than a standard checking account or a GIC. It also has a lot more flexibility than an RESP, in that the funds can be used towards anything you choose, not just education.

But don’t take my word for it. Jim Pattison, one of the richest men in Canada, has attributed his wealth to his whole life insurance policy. He used the equity in his policy to start his very first car dealership. The bank may not have  given him the money he asked for if he didn’t have his life insurance cash value. You can see this letter here:

So if this savings plan is so great, then why have you not heard of it before you ask? Well mainly because most people go to the bank for their financial advice, and banks cannot offer personal insurance products. In Canada, banks are required to be separated from insurance companies. This helps to keep the two entities from depending on one another too much. So since banks dominate the financial world, you only hear about what they can offer.

Most life insurance companies are not well known companies because they don’t have buildings everywhere like the banks do. You can only hear about their products through a licensed life insurance agent.

The truth is, life insurance companies are dedicated to protecting your assets, where banks seem to focus on signing you up for a credit card. Who do you want to work with to help build your wealth?