Household spending for the Christmas Holidays increased by $160 Billion between 2014 and 2018 and was expected to increase another 4.5% in 2019. Spending cooled some for the Christmas Holidays in 2020 according to the National Retail Federation with Americans spending roughly $998 on gifts, food, and decorations. According to historical data 68% of Christmas Holiday spending is money parents spend on gifts for their children. Extrapolating this data allows us to deduce that parents spend close to $700.00 on gifts for their children at Christmas.
Gift giving is a way to express our love and appreciation for others out of gratitude of what we ourselves have been provided. We all have heard the truism that “It is better to give than receive.” And yet, there is a fine line between giving and cultivating greediness.
Our family tradition, for the Christmas Holiday, has been to focus on the ultimate gift, which was given, once and for all, rather than exchanging gifts. Our tradition, contrary to what many have supposed, is not to become a Scrooge, but quite the reverse, to prevent our children from becoming greedy.
Our tradition was not because we oppose gift giving. We love giving gifts. Consequently, at each of our children’s birthdays all our children received a gift, regardless of whether it was their birthday or not. This kept the birthday child from becoming excessively focused on themselves while helping them to enjoy their special day by rejoicing in the gift(s) others received as well.
Imagine what would happen if parents purchased life insurance for their children instead of lavishing so much on them each Christmas. At $700 a year, over the first 21 years of child’s life, $14,000 could be paid in life insurance premiums instead of being spent on seasonal gifts. As the cash values in the policy exceed the premiums paid, there will be more money for the child to use than what the parent has paid overtime.
If the child leverages the cash value at age 21, they could finance the purchase of a (computer, car, college, travel, business loan, etc.) with up to $15,450.00 of cash value available. Repaying this policy loan over the next 10 years, at a mere $249.00 a month, will allow that child to keep $29,911.50, which normally would have been lost to the bank, credit card company, or some other financial institute.
But over those same ten years, the policy cash values will have accumulated an additional $8,987.00, without any premium payments required. Thus $38,898.50 is what the child can accumulate without spending any more money than what they would have spent making the same purchase which they financed via this policy loan.
This process can be repeated. If it is repeated a minimum of three more times (every 10 years), taking a maximum loan against the policy cash values to finance a purchase and repaying that policy loan over the following 10 years, then the child will accumulate a significant amount of money which would normally have been paid to others over their lifetime. In this specific example, about $325,000, making cash value life insurance the gift that keeps on giving for a lifetime, not merely for a season.
Adding this $325,000 accumulated to the average savings account of 61 year old in America, and this “child” has accumulated close to three-quarters of a million dollars. As income for this age group is $80,500, retirement savings should be roughly 8x annual income. The savings of the typical American is not sufficient enough to endure full retirement, but with the money this child has been able to keep instead of losing because of this cash value life insurance policy, they have more than 8x their annual income and can sustainably consider retirement without the fear of running out of money before they die.
This Christmas, think about the gifts you are giving your child. Are they gifts that will keep on giving or will they be gifts which encourage a materialistic mentality? Consider the value a cash value life insurance policy could provide for your child and give us a call to purchase the gift that will keep on giving to them for rest of their life.
Dr. Tomas P. McFie
Most Americans depend on Social Security for retirement income. Even when people think they’re saving money, taxes, fees, investment losses and market volatility take most of their money away. Tom McFie is the founder of McFie Family Insurancewhich helps people keep more of the money they make, so they can have financial peace of mind. His latest book, How to Build Sustainable Wealth, can be purchased here.