Investing in a Newborn

Physician's Money Digest August 2005
Volume 12
Issue 12


You've possibly heard arguments inyour practice between family members onwhat's best to do in regards to starting anewborn baby off with a savings account.According to an editor's letter on (, a reader'smother wanted to purchase a $50,000 lifeinsurance policy for her new grandson.The parents, however, believed that a collegesavings plan or custodial accountwould make more sense. ColumnistWalter Updegrave agrees with the readerthat a life insurance policy wouldn't be asbeneficial as a college savings plan.Updegrave points out that while lifeinsurance is a great idea for adults in theevent of the death of a financial providerfor the family, a baby isn't likely to be themain source of income for the family.Therefore, there is no financial reasoningbehind a life insurance policy for aninfant. Although the money in a life insurancepolicy would increase tax-free, thesales and marketing charges would belarge, and not worth it in the case of aninfant. Updegrave asserts that a 529 collegesavings plan, Coverdell account, orUniform Gift to Minors Account wouldbe more financially beneficial down theroad for a newborn.

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