Mr. Klegon has his doubts. If you don't need the protection, it's not a very efficient way to grow your money. But he says that if you are buying a cash-value policy to protect your family in case of your death, the policy also can provide a good way to amass at least part of the money needed for college. Once your child reaches college age, Mr. Katt says, you can withdraw your accumulated premiums tax-free to help with tuition costs. You could also borrow against the policy, though Mr. Katt discourages clients from doing so, in part because of the interest costs involved.
Parents often buy life insurance in their children's names.
Because the chance that a child will die is slim, premiums tend to be low. But experts note that life insurance generally should be bought only by people with financial dependents. Because children don't have any dependents, buying life insurance for them almost never makes sense, experts say. Saving money in your child's name when you hope to get financial aid. Sure, it's tempting to do, because you get a small tax break.