How To Invest In Your Child's Future Education (HINT: Not RESP!) Canada

Is there going to be an estate value that I leave behind, a house that's paid for or maybe, oh, I don't know, a whack load of tax free life insurance that I already have that's accumulating every single day that I put my head on my pillow and wake up the next day, in which case that money is going to come in and it's going to, my son will be able to refill and backfill the policy loan that I've used, resetting everything back to zero so he has access to all that capital again to do whatever he pleases, whatever he chooses to do.

This is my son Nathan. And this picture right here. Hello, I'm new here. This is true because Nathan was very young at this stage. He was roughly around maybe 15 or so, 16 days of age. And this is a picture I actually sent to Nelson. It's one of my favorites. And we're going to talk about looking at policy over a lifespan. I'm going to show you an example and I'm actually going to walk you through a personal aspect of my wife and I being able to work with a policy we set up on my son for our own retirement, our own passive income. Now of course I do have a picture. This is the only picture I have of my son meeting Nelson. I was so blessed to be able to do that. My daughter unfortunately never had that opportunity. I do have two signed copies of Nelson's book for them here stored. Funny story, very recently actually my daughter, she comes into my office every once in a while. Of course I have my copy of the book always on hand. And lately she's been asking and she says, hey daddy, is that one mine? Is that my version? Because she knows that there's one that I have for her. They understand the importance of this book even at a very young age. And my daughter's four presently. So it doesn't take much to get your kids engaged in this process. As you start young, having things like this that are reference points, recognizing it's important, talking about its importance goes a tremendously long way to what we can set up for our own children. We are going to go into my example here. Now we're going to talk about this using a child example. But what we're going to be doing is we're talking about the, the usage of capital over a lifespan. So the focus here is about usage of capital over a lifespan and we're going to incorporate, you know, parent and child. Now this could be grandparent. This is an automatic, you Know, we would say an extra body that you can now have an insurable interest in. So we talk about a system of policies or multiple policies that we have. Myself, Vern, Jason, some of our team members all have multiple policies on people, mostly family members. And we do that because a, it's a logical reason to cover everyone that for the need of insurance. But also we're building capital on all of these members of the family for usage for different reasons over time. So we're going to talk about that. I'm going to show you an example. I'm going to use my son as an example because that way it'll glue together when I flip back to my slide deck. And so this is an example that we built talking about funding a policy on a child, whether it's a grandchild or child or a niece or a nephew, and doing that for a 20 year period of time. Now obviously we would recommend doing it longer than that. I'm going to show you at the end of the example putting in more deposits over time, which is what I'm going to do personally and I'll talk to you about that, the reason for that in a moment. But we're just going to look first at a 20 year period of time and what the power of that is and then how it can be utilized by that child or by the parent in this circumstance as we go through time. So in my example, you see I've got a little slider here. This is, you know how much we're making in deposits monthly. So I've got 50 bucks a month, 100 bucks a month, 150, 200, 250, all the way up to 500. So you guys can see the graph is moving and the impact of those deposits over time. Like there's a huge jump between 250 versus all the way to 500 and what the impact is over that 20 year period. Okay, so I'm going to run my example at 200 because that's pretty close to what I'm doing for my kids right now and then we'll tie that together in my example. Now we have some age sliders here. So we got looking at kids at different ages, obviously if we start a little bit later in life, is it going to have as much time to grow? Obviously not now. It's still going to be great. We're just have a, we have a lower timeframe that we're looking at. That's the difference really. In the example I'm going to be running at age 0 though, looking at A newborn. And the reason is, is because that's when I started the policy for my son and for my daughter. So here I'm doing roughly about $200 a month. My plan is for at least 20 years now. I'm going to be doing that longer. I already know that for me. But our example is built around a 20 year contribution. We think about people putting money into an resp or into some kind of a savings mechanism for their kids. It's extremely common. A lot of people take their Canada child benefit if they receive it and they just reallocate those dollars into a plan of savings for their children. Once you recognize what this will do for your child over the lifespan and for you as well, the likelihood that you'll ever put money into an resp again I would think go down to almost zero. But nevertheless, that's a choice you get to make. So here we go. We're going to jump right into again a couple of high level things here. At the end of the first year, you know, I've put in whatever 2,400 bucks. I don't have access to all my capital, but I have access to a decent chunk already. I go 20 years out, I've now got access to 49,000. That'll go a long way to helping fund a college education if that's what my kid wants, or if my kid wants to start a business or if my kid wants to get involved in rental real estate. Maybe my kid and I can tag team on a down payment on a piece of real estate if that's the case. Or maybe he just wants to buy his own piece of real estate and we can figure out how to do that for himself. Maybe it's a condo. So we're talking about capital utilization. And of course as we go over time, you can see the impact of what this can turn into even if you just recognize. Look at age 65 to 75. We stopped funding this thing in 20 years, so we stopped putting money into it. And we have a pretty big accumulation even without feeding new money in over that 10 year timeframe. Very, very powerful. I'm going to flip to the next tab here. This next tab is recognizing age 20. So we're at age 20 of the. Of of my child in this case, talking about my son here because that's the example I'm doing. We have $49,000 accessible. Now. The cash value is actually a little bit more than that. This is 90% of whatever the cash value is, which is actually what we have to work with Working capital. And so what I want to do for me, and I'm going to encourage everyone to do this, we want to start getting our kids, kids and grandkids, saving early, saving and investing and learning how to do that, developing the habit, the key mental habit of taking that action. So I'm going to encourage my kids to take a policy loan for an amount of money. And in this case I'm going to take, let's say I use $2,000. You know what, I'll make it 2,500 bucks. So I'm going to encourage them to take a policy loan of $2,500 at the beginning of the year. But I'm going to encourage them to go and save or invest that in something. So we're going to encourage them to start asset funding, start asset funding early. So he's going to go and put 2,500 bucks and start a crypto wallet or whatever he wants to do there. And he must now make a payment monthly back to the family banking system. He's borrowed 20,000, 2,500 out. The policy continues to grow. The money's still growing in the policy. The death benefit, all that stuff is growing. He's accessed 25. He's now starting to learn the habit of putting money away for long term growth. And he's making a payment back to the family banking system. So at the end of the next year he can access all those payments again and he can reload his crypto account for re upping and buying more. Okay, so the key is in building the habit. The habit, the habit. I don't know what he's going to get in growth on that plan. Maybe it tanks and he only gets like 2% over the entire lifespan or maybe he gets 5%. Well, you can kind of see if he does that continually starting at age 20, all the way to age 70, what kind of an account balance he could have. Now the key thing is this. He built a habit of saving regularly, repetitiously, consistently. So that becomes built into his budget on a very easy basis. And the policy kept growing the whole time. So he has the policy and he has a crypto account. We're going to look at the next phase here and that's looking at buying a family home. So we're at age 30 now. We started at zero, we're at age 30. We only put money in contributions as the parent or grandparent. For how many years? 20 years. Which means for 10 years, 10 years, no new money has gone into the policy. We could have put more in. But in my example here, we're assuming we did not do that. So kid wants to go buy a house or we want to help him buy a house, whatever that is. Now, let's say you wanted to put 25% down on the home. All right, well, that would be depending on the home style. He would be able to get about a $300,000 home with 25% down. But as soon as he starts increasing the home value, he can't put as much down. Right. So if we go all the way up now to $550,000 home, he's at 10% down. That's about the most he can do. Of course, we keep cruising this up. There's a home values again, where you live, what they like, what they change. We don't know what that's going to be, but in this case age 30, we've got 77,000 to work with. We could still put technically a 5% down on a million dollar home. That might not be enough to get us there, but it's a pretty good start compared to where a lot of other kids are at age 30, especially in an increasing house market. So again, we have access to capital now. Maybe he doesn't want a home. Maybe he wants to increase his crypto account because he's got really good at it. Maybe he wants to go and start a business, launch a podcast. I have no earthly idea what he's going to want to do, but he'll have access and capacity. The thing is, who does he have to come and ask who does he have to come and ask to get access to that 77,000? The policy owner in this case, that's me. And if something happens to me and I'm no longer here, the policy owner becomes my wife. My wife takes over and she'll become the person looking after the family banking system until such a time as she wants to hand it over or I want to hand it over to my son, or we're both gone and then it naturally transitions to my son so he'll be in control. At that point, I personally, personally, for me, you guys get to make up your own mind, your own decisions. I want to maintain control over that because I want to make sure my kids are proven, proven that they can demonstrate the right habits to be a good steward of the family banking system. If they're not proving to me that they're going to be a good steward, they're not going to end up with it. I'll give it to charity, I give it to the church. I'll fight cancer. I'll do anything else with the capital because I get to make that decision, not them. They have to demonstrate they're going to be a good steward. I'm going to flip over. Oops. Jump, jump one there. I'm going to go to age 40k. Age 40, we got 125 accessible. Now. If we borrowed 77 for the down payment on the other house, will we have 125 accessible if we haven't paid it back? The answer is no. We have to make a repayment schedule. Okay? So my son will be learning that process. Maybe he hasn't fully refunded all of it, but he's got most of it in there, you know, so let's say there's 100,000 available. He could go do something with that capital. All right, now we're going to go to age 50 again. This is still accumulating. No new money has gone in. We only put money in for 20 years. Remember that? 20 years. If we put more in, obviously it'll be better, but we stopped making contributions a long, long time ago. He's got more capital. If he puts it to work, maybe it's some other investment. Maybe he buys a franchise business. Who knows what's, you know, maybe he's buying land in the metaverse. Like, I have no idea what is going to be available for him as opportunities. I do know this. If he has readily available, readily available access to capital, opportunities of high caliber will track him down. That's something that Nelson Nash taught us. Very important. Now I'm going to flip over to the next tab here. This is about legacy. In other words, what's the death benefit like on this contract? Well, you know, at age 20, he's got 437,000 of death benefit. By the time he's at age 75, we stopped funding this thing. At age 20, there's over a million dollars in tax free death benefit. I think that's pretty good. Did your parents set up anything that's going to have a million dollars of tax free death benefit set up for your next generation when you were young? I'm going to take a wild guess that most people didn't have that happen. You have the ability to make a choice about how to make that happen for your kids and your grandkids, because they can't do it for themselves. It's really up to us to make that transition. Now I'm going to go to the last tab. This is where we get to start having some fun. This is all about looking at the power, I repeat, the power of deposits over a lifespan. So I would call us the golden child tab. So I've got a couple of bars on the, on the graph here. Now again, we're making contributions for 20 years, parent or grandparent. But we could continue contributions now. I can continue. So the grandparent could continue, the parent could continue, or the child can continue. It doesn't matter who's doing it. Anyone has the option. We just got to fund the premium. That's all there is. So what were to happen if we decided we wanted to continue funding it? And I'll just go up here and I'll slowly move this slider up and I move it halfway. Remember, we're doing 200 bucks a month. Let's say we just did half of that amount. We did 100 bucks a month, 1200 bucks a year. In other words, over the remaining timeframe, the child or the parent puts in an extra 66 grand. So 48,000 plus 66. We're now at 114,000 of total lifetime contributions. Okay, Take a look at the difference in that, that adjustment from age 65 without increasing deposits to age 65 after we increase the deposits. I don't know about you guys, but that looks like a pretty big difference in a number, doesn't it? I would say so. And you can see the difference in the gap. Look at how the gap over a 10 year period from 65 to 75 widens. Look at how big the gap becomes over that timeframe. This is the power of uninterrupted, I repeat, uninterrupted compounding working on your behalf, on your benefit. The only way you can have that happen is if you have a machine, a tool that allows your money to continue growing on an uninterrupted basis. Here's what I'm going to do. Let's assume, if it looks that good, we would probably look pretty good if we just took it all the way up to 200 and kept that going. Me as the parent, that's my plan. That's what I'm going to do. And I'm going to be trying to teach my son to do the same thing. So now we've got a lifetime contributions of 180,000, if you guys can see that. And at age 65, for my son, there's 752,000. This is cash value, not death benefit. Okay? Cash that we can work with. So you see where we've got the grandparent. This was our original 20 year period. In the dark green. Now the yellow bar is because we kept funding it. And there's a big difference here. It starts to get wider and wider as we go. I want to walk you through a thinking process. Go this point here and this point here. So I need to get those numbers on the screen. Okay, so this is 156 and 113. So 113 and 156. So that's the difference between these five year increments and how the, how the policy grew over that time frame. Okay, now 30 years out from the beginning of this contract. Well, when I started this, I was, you know, I was about 30. Well, I was about 35, 34. But let's just assume I was 40 and we add 30 years onto that. So dad's 40 plus 30 years. That puts me at 70, you know, give or take, my wife and I in this category of age. All right, and If I have 113,000 in here and it's going to increase by $40,000 over the next five years, is it reasonable to be able to access some of that capital for me? Let's just say hypothetically, I'm going to take, I don't know, somewhere around 5,000 to maybe as much as $10,000 a year out of here as passive income. Could I do that for a period of time before dad kicks the bucket? Let's just assume right around this time frame in my blue bar, you know, dad kicks the bucket, I'm graduated, I'm dead. Is there going to be an estate value that I leave behind, a house that's paid for, or maybe, oh, I don't know, a whackload of tax free life insurance that I already have that's accumulating every single day that I put my head on my pillow and wake up the next day, in which case that money's going to come in and it's going to, my son will be able to refill and backfill the policy loan that I've used, resetting everything back to zero. So he has access to all that capital again to do whatever he pleases, whatever he chooses to do. And at that stage of the game, he's 50 some odd years old. He's now developed a clear understanding of this process through practicing it over a lifetime, seeing it in action, that he knows exactly what to do. That is the power of what we can set up for our kids and for our grandkids, but more importantly for us as parents, when we understand the power of using a machine like this. Let's actually talk about what I've actually got going on for my son. Now, this is only the first policy for my son. I do intend on getting more, but let's just walk through what I actually have. So I have right now a policy. It's about 2000 a year, so a little under what we talked about, but very close. It's about 12, 30 bucks is the minimum and $700 is very flexible. Now I have some riders on there, riders that I want. I think they're very powerful. We're not going to get into that today. That's a conversation you have with your coach. When I started this, I used the Canada child benefit. It was before the current one came in. It was the one under the Harper government was about $160 a month. So, boom, I just took that money and I stuck it right into a policy immediately for my kids. Very simple. Now, I don't receive the new benefit that's available today, but a lot of people do. It's a great starting block for getting something started for your kids. At the time, Nathan was zero and I was 34. Like 34 and a half when we started that policy. Now, 20,000 or, sorry, $2,000. And I plan on putting money in for a minimum of 35 years. We just showed you 20 years. I'm going to plan on doing it for a minimum of 35, which takes me up to around age 70. That will be $70,000 in inputs. I'm going to contribute of my capital inputs into this policy over time. So from age 70 to age 95, I'll be able to take out tax free $9,000 a year out of this policy. If my wife and I choose $9,000 a year. And that's actually for 26 years. It looks like 25, but it's actually 26. So that's pretty cool. Like that situation. So let's do the math on that. $9,000 for 26. That works out to $234,000 of passive income that I got to work with and use while I was alive, I put in the $70,000. I got to pull out $234,000. But we forgot something. What about Nora? We got little Nora. When Nora came along and joined our life, you know, roughly 19 months later, we had to make sure we got a policy on Nora, didn't we? Of course. So here's. Here's little Nora. This was little Nora at 16 days of age. And there's a paper clip back here. You guys can just barely see under the book. Guess what? That's her application going into the Life Company. Here's Nora and Nathan learning about podcasting, of course, joining me in the studio. They always love to come and hang out in the studio. So I basically have the same policy for her. It's this pretty much identical. There's very little difference to it. The only difference is it's two years later in time. Only difference. Okay. And so using a little bit of logic, if I've got two policies that are virtually identical and I can get 9,000 out of one, I can pretty much get 9,000 out of the other one. Right? Okay, good. Well, we do some third grade arithmetic. As Nelson would say, that's 18 grand a year, tax free. The way we're going to teach you how to do it. If that's the direction you want to go, you get to decide through coaching and education how you want to proceed with this. I do that for 26 years. That works out to $468,000 output in my hands. I put in 70 and 70, which is $140,000. And I got to use my wife and I. 468. Dad's gone. Kids can still use it. Let's take a look. Let's go one step deeper. Here we go. Here's year 35. My son, year 35, which works out to me being 70 at that time, 35 years later. For 26 years now, I ran this at a 5% interest rate. Today, you'd get a far better rate than that, but I used a more conservative number. Over here, you guys see yearly premium deposit of $2,000. It was 2001. I hope you guys are okay with that. I like to round things off to keep it simple. You can see cash value. See that? Cash value growing and growing. I don't have access to every dollar I've put in, but I'm getting pretty close by the sixth year. Now let's take a look at passive income time. Here's age 70 for me. And over here, we're going to start looking at a bank loan. I'm going to bring this all up. Now, I put a break in here because I wanted everything just on one page. I just want to keep it simple. Where did we start and where did we end? So here's the first year of taking an income, and I'm doing that for 26 full years. So just imagine in your brain that this blue line in the middle is just a continuous sheet of paper. All right? Right. Age 70. Here's age 95 down here. And you can see we've got this bank loan column now. There's $9,096. I told you guys, 9,000 bucks. Is it okay if I take 91? You can see the bank loan balance is growing and growing and growing. In this case, I'm not putting any money back on the policy loan. Could I do that? Say yes. But in my situation, I'm using a passive income. I'm going to refill that loan, or at least I'm going to leave instructions for that loan to be refilled when I'm dead. In other words, there is a plan. A plan in place. A plan in place to repay that policy loan with certain proceeds. Each child is funding the policy at this point. So I funded it for the 35 years. Now I say, okay, Nathan, dude, you've been doing this for all. You're 36. You better. You better get. It's your turn, man. You got to send me, you know, $2,000 a year to pay your premium. I'm paying the premium. You're going to give me the money to pay the premium because I still own it. All right? Now take a look at what happens way out here at age 61 of my son. I'm 95. I'm assuming that Richard's dead at this point. This is actually not true. My goal is to lift age 165, but that's a topic for another day. So here we go. Loan balance of 488,000. Big fat accumulated loan. What happens now? Well, the cash value is 546. There's still some value there. If I die and my tax free death benefit comes in, Nathan pays that policy loan off and resets it to zero. By the time he's 65, isn't there 665 grand of capital available for him for any opportunity that he wants in life? Because we had the foresight to start it at the very beginning. You can't go back in time, but you can get started now. And that's why I got started as soon as I was able to, because I was blessed to be able to meet Nelson and learn this information. Thanks to Jason Lowe, who said, richard, I love you, bud. Go get this book. He cared enough about me to tell me to go and buy this book. And it changed everything in my life, exactly like I'm showing you right here.