Investing in a Newborn

Physician's Money Digest, August 2005, Volume 12, Issue 12

CNN/Money

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 (www.cnnmoney.com), 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.