One question that keeps popping up is how to provide adequately for children, and by extension, grandchildren in these days of growing financial and job insecurity.
Many parents who have seen several cycles rise and fall in the jobs and stock market, are more concerned than normal as they watch Greece, now Italy, Spain and Portugal struggling with overwhelming debt and high unemployment. And that is all in addition to the us situation where the so called problem solvers are not even on the same page.
On August 8th the Globe and Mail headlined:
Market mayhem puts Canadian rate hike on back burner
“Less than a month after Mr. Carney began hinting interest rates would be going up soon, the market is now betting against such a move. Trading activity in money markets indicates that many investors now believe his hands will be tied until at least the end of the year, and possibly into early 2012.
The growing threat of another economic slowdown has left the Bank of Canada with little choice but to put off planned hikes for fear of damaging the recovery further, market watchers say. That means temporary relief for homeowners concerned about a jump in their monthly mortgage payments, but it also means low returns on savings and deposits. Low interest rates are usually a symptom of tepid economic growth. ”
So the problem becomes “how can we make sure our children can protect themselves against a financial calamity?”
One of the approaches that several clients have adopted, is to take out the most life insurance they can afford. Life insurance proceeds are tax free, so I instead of leaving cash, they use the cash to multiply how much they can leave to each child. And should the life insurance premium become burdensome, the beneficiaries can help to pay the premiums as it is their own self interest.
Of course of least one of the parents or relatives have to be insurable, so this is not always a possible solution.
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