I know this is an old thread, but I wanted to include a perspective that has not been represented here, as well as a modern alternative to that same perspective.
I inherited a genetic disorder from my father. He could never get life insurance, and when I was 20 and just married, my father tried to get me to buy whole life. I was young and stupid, so I had better things to do with the money. Notablely, that didn't include investing it. Ten years and one kid later, I was diagnosed with the same condition, and am now permanently ineligible for life insurance. I now have 5 kids, but the last three are adopted, due in part from the risks of my inheritable disorder. So now that I have a different perspective, I have been researching into buying a permanent life policy of some form for my two oldest children; for I don't intend to give them the option of screwing this up.
To be clear, this is not an investment vehicle, it's a permanent life policy. Specificly, the one that I'm looking at is a 10 paid-up whole life policy on each. It's better than term for them, because it would cover them for their whole life (thus named) and the premiums are paid by myself over a ten year period, then garranteed by contract forever. This exact policy comes with other advantages, such as the ability to "borrow" from the paid policy in the event of a monetary crisis; and that the owner (myself or my wife) and not the policyholder (my kids) have the final say on any such loans. So it makes a great emergency fund, for a real emergency. A red sports car is not an emergency.
That said, there is also an alternative to this plan, even for my children, once they have their first job. A Roth IRA. Any IRA has a 'death benefit' as a 'qualified' reason for withdrawal, but the Roth acts like a life insurance policy because 1) contributions (premiums) are after tax and 2) qualified withdrawals (benefit payouts) are not typically taxed. Also, the after-tax contributions to a RothIRA can be withdrawn without taxes or penalties, but not the interest or gains. So it can also function as an emergency fund up to the actual amount contributed.
Either path is complex, at least for my family, so I expect I will do a small whole life policy as well as contribute to their first RothIRA to accomplish my goals.