The Education of Emily Elizabeth

When Emily was born we bought her what we thought was a rather large whole life insurance policy of just under $300,000.00 that had an annual premium of $3,000.00 for 10 years. This would generate about $53,000.00 for her college funding in 2002 when she became a 17 year old high school graduate.

When Emily turned 10 and the policy premiums ended we realized that the $53,000.00 we expected from the original policy was not going to be enough to pay for her college so we decided to continue the contributions of $3,000.00 per year into another new policy. We only wanted to pay for this policy for seven years but decided that another 10 pay plan would work out well since it would mature in Emily’s second year of college. This second policy was just over $200,000.00 and would yield about $32,000.00 in 2004.

Well, like all good plans this one didn’t work out as planned – it worked out much better. When Emily graduated grade school she had proven herself both an outstanding student and a superior tennis player. She was so good that a prestigious college prep high school offered her a partial scholarship and assured her a spot on their state championship tennis team. At first we thought that we could not afford even the partial tuition payments but when we looked closely we discovered that we could borrow the $6,000.00 per year tuition and fees from her policy and still have money left over to fund her first year of college.

Four years went by like lightning and life got surprisingly better with each passing year. Emily went to the state singles finals as both a Junior and as a Senior, when she won the state title. She received full ride college scholarship offers from her two top school choices and is now in her Junior year as a pre-law student. She has hopes of going to Harvard or Yale. We have already paid back the $24,000.00 in loans we took out for high school and have borrowed an additional $18,000.00 from the policies to buy Emily her first car – a small SUV. Emily is actually paying off the car loan herself using her part time school year and summer job earnings. When she graduates the car will be almost paid off and she will have nearly $100,000.00 in her policies to help with law school or whatever she chooses to do.

Looking down the road, if Emily borrows the entire $100,000.00 to pay for law school and then pays it back over the first five years of her career she will have almost $200,000.00 in her policies at age 30 and will be able to buy a first home using these funds. But, I suspect she will have a lot more than that since she has already bought her own $100,000.00 policy and is planning on buying that much more each year she can afford it. In case you’re wondering why, Emily peeked at the cash value that she could access tax free at her age 65 from just the two policies we bought for her and it totaled over $1,500,000.00 and I think she wants more.

We will retain control of these policies at least until Emily graduates law school just in case we need the funds for some emergency and so that Emily will not have to pay attention to the details until she is established in her new practice. Then maybe she can buy some insurance for us – I understand Harvard graduates earn a lot of money right away.