We all know that traditional banks have many inconveniences—from high fees and inflexibility to depending on global economic factors like inflation and recession.
But did you know that you can have your own family bank?
Well, you can.
And in this article, we will cover everything you need to know about the family bank, how it works, and—most importantly—how you can start your own private family banking.
Let’s dive in!
Everything You Need to Know About Family Bank
In order to understand what a family bank is and in which aspects it’s different from a regular bank, we need to take a short overview of a traditional bank.
How Are Banks So Wealthy?
Banks are financial institutions where people can deposit money and take out loans to fund something they need. When someone takes out a loan, the bank charges interest on it, which is higher than the interest they will pay on money someone else is getting from savings or checking accounts. The difference between what people pay to banks and what the bank pays to people is their profit.
Did you know that banks earn between 500% and 1800% more than every one of us? And all of that just by moving our money.
So, banks are getting wealthier and wealthier thanks to our money.
We still need the bank itself, but fortunately, there is another way to do the banking.
What is a Family Bank?
A family bank, personal banking system, or Infinite Banking is a financial strategy of utilizing your high-cash-value whole life insurance policy.
There are many names and small differences between different concepts of this method. Still, they all have something in common—they imitate traditional banking, but instead of banks getting wealthier and wealthier, you are.
We took this idea from Nelson Nash, a founder of Infinite Banking, who explained this strategy back in the 1980s. But, since everything changes—our needs, wants, and lifestyles—we’ve made minor adjustments and come up with something that works for us and our clients—Lifestyle Banking.
We will explain the main concept now, and at the end of this article, you will see what the difference is between our improved way and the traditional one.
So, the family bank is a system where you save money in mutually traded whole life insurance companies instead of in a bank. As a result, you can access and use your money whenever you need it; the interest rate is much higher than it is in a regular savings account, and you can borrow against your policy’s cash value and set up your own terms for repaying that loan.
When you put money into a whole life insurance policy, you get a death benefit and a safe place to store your money, which will pay you interest.
So, why do we store money in banks? The truth is, no one teaches us how to do things differently.
When you have a private family bank using a whole life policy, banks or the Fed don’t tell you what to do with your money—how to save it, borrow it, and spend it. Instead, you have complete control over it.
Moreover, when you borrow money against your policy, you don’t have to wait for approval; there are no credit scores or checks, and you don’t have to put up collateral (like your family business, car, or home).
So, you get everything you would use a bank for, but without drawbacks.
However, we must be honest and realistic. The freedom and opportunity you get from having your own bank also require extreme discipline, knowledge, and creativity.
If you want to have your own private family bank, you must also be your own banker, right?
Luckily, it’s achievable, and we can help you.
Whole Life Insurance Policy—Main Role
The first step in creating a family bank is buying a properly designed whole life policy. It’s crucial to be specifically designed for this financial strategy, or it won’t work.
Why whole life insurance?
There are a few reasons for that.
A whole life insurance policy is a type of permanent life insurance, meaning it will provide coverage as long as you pay premiums—i.e., your whole life.
Another reason is a savings component called cash value. Whole life insurance policies have a cash value where interest accumulates on a tax-deferred basis.
And this process wouldn’t be possible without the opportunity to take loans, which your whole life policy allows you to do.
When buying a whole life insurance policy, you must keep two things in mind:
- You need to get it from a mutual insurance company
- That insurance company must be reliable and professional in creating life insurance policies for family banks.
It is essential to choose a mutual insurance company because, because policyholders own the entire company, if it performs well, you will receive dividends. Dividends are not guaranteed, but there are ways to predict which company will pay dividends and which one to go with.
As we mentioned, whole life insurance policies have a built-in savings component. When you pay your monthly premium, a piece goes toward the death benefit, and the rest goes toward the cash value.
With every payment, you’re increasing the policy’s cash value—like savings in a bank account. However, there is one huge difference—with a whole life insurance policy, you have guaranteed interest.
And now we have an answer for why a whole life policy plays a crucial role in private family banking—the cash value allows us to borrow tax-free against ourselves, earn an annual rate of return, and provide for our family members.
When is the best time to start? It’s never too late, but it would also be better to start sooner rather than later.
The earlier you start and the more money you put into it, the quicker your wealth will grow. On top of that, if you buy your policy when you’re younger and healthier, your monthly premium will be lower (and it will remain the same throughout your entire life).
Policy Loans
You have a few ways to access the cash value of your whole life insurance policy, but we will only explain loans in this article.
We say that you are taking loans against your whole life insurance policy, but this needs more explanation because you don’t actually use your money.
The mutual life insurance company collateralizes your account and gives you their money instead of yours. It is a fantastic advantage because, thanks to that, your cash-value life insurance policy keeps earning guaranteed compound interest. So, taking out loans doesn’t disrupt the growth inside the policy, and as a result, you can borrow more and more money every year.
The most significant difference between a traditional loan from the bank and a policy loan is that policy loans are not taxable, and you determine the terms of your loan—there is no way laws and conditions can suddenly change.
This process is called the private family banking system because you’re essentially doing the same as you would with traditional banking—paying principal and interest—but you’re paying yourself, not financial institutions. On top of that, you get better deals, complete control, and flexibility.
Advantages of Private Family Bank
Tax Benefits
We already mentioned that when you take out a policy loan, you don’t have to pay taxes on interest and dividends, but that isn’t the only tax advantage of the private family banking system.
You can use your policy to fund retirement, which will effectively generate tax-free income during your retirement years and will be deducted from the death benefit at the end of your life. The remaining death benefit will be paid to your family members, which is also tax-free.
Many families successfully pass on their wealth to the next generation thanks to these tax benefits. A very famous example is the Rockefeller family, which successfully established private family banking to preserve family wealth and ensure the long-term welfare of their lineage.
Asset Protection
One of the biggest benefits of the private family banking system is that it is private, which means there are no third parties.
You have a private contract with your life insurer, meaning asset searches, judgments, creditors, and lawsuits are protected. Moreover, in some states, money in private family banks can’t be called upon in the event of bankruptcy, a legal settlement, or if you default on a loan outside of a policy.
Building Generational Wealth
One of the greatest uses and biggest advantages of this method is building and protecting a family’s wealth for future generations.
The compound interest you earn on the money within your policy is not subject to tax, unlike most other investment vehicles. Over time, this can add up to a lot of savings, which can be put back into the policy and keep earning interest on top of the interest.
Should You Start Family Banking?
Let’s look at recent events; they will help us answer this question.
We’ve seen two U.S. banks collapse and many more in history. So, your money isn’t safe in the bank, and here is why.
Are you familiar with fractional reserve banking? It is how banks do things—they only need to keep a fraction of your deposits on hand.
For example, if you deposit $100,000 in the bank, the bank must only hold 5% of your deposits on hand. That means they can lend $95,000 of your income to other people who need lending opportunities.
The banks assume that not all people who deposit their money will need their funds every day, all day. Based on this premise, they keep your money circulating to generate revenue for themselves because banks are businesses. And that’s how they can pay you interest on the accounts that you sign up for.
What we saw happen with Silicon Valley Bank and Signature Bank was a failure because there was a run on the bank and they didn’t have all the funds. That means all the depositors, or many of them, came to the bank and said, “Hey, I need my cash,” and cleared out the storage.
Usually, people have strong reasons to do so. For example, they heard the bank is low on deposits, isn’t doing well, or is even investing in risky investments. These are all red flags for people who fear losing their hard-earned money. In these scenarios, everyone does the same thing—goes to the bank and asks for their cash.
And that is one of the main reasons we think it’s much safer to use whole life insurance to take over banking functions. Because we use the family bank the same way as a traditional bank, we just aren’t financing our lifestyle needs through a bank. On top of that, we are paying ourselves the interest instead of paying it to the bank.
Banks are regulated on the federal level; hence, they have FDIC insurance, Federal Reserve Banking, and other rules associated with having a federally run business.
On the other hand, mutual dividend-paying insurance companies are regulated at the state level. The difference is that these life insurance companies can’t do fractional banking and must ensure that every dollar is accounted for based on Austrian economics, which means that one dollar protects one dollar.
With the private family banking concept, you get protection when other banks are collapsing, lifelong coverage, a death benefit, a cash value that grows at a guaranteed rate, and much more.
So, do you think it’s more beneficial to risk your money in traditional banks and have poor conditions, or to have your own system that works for you and not against you?
We choose to have control over our own money and personal finances.
How to Start Your Family Bank: Lifestyle Banking Concept
As promised, we want to introduce you to Lifestyle Banking.
Lifestyle Banking has the same idea as private family banking or infinite banking, but with one major aspect added—a money mindset.
There is no way you can successfully manage your own bank if you don’t improve your money mindset.
Financial advisors and professionals don’t discuss the importance of how you think about and understand money. And the truth is, that is one of the most critical aspects of changing your financial game. You can’t succeed in a new system using old habits and practices.
We call it Lifestyle Banking because when you learn the technical aspects of family banking and improve your money mindset, you won’t need to change your lifestyle to fund and enjoy it. Whatever your lifestyle, you can fully live it once you learn how to move money like banks.
You can think of Lifestyle Banking as family banking upgraded to the next level. We added something that was significantly important throughout our journey—a mindset shift.
Thanks to a mindset shift and a lot of learning and researching, we successfully erased $140,000 of our own debt, and that was only the beginning.
Our main goal is to educate people about money psychology, well designed whole-life policies, and the infinite possibilities of using this system in their everyday lives.
With Lifestyle Banking, other families created their own family banks, improved their finances, and generated over $75 million in death benefits. And you can do it, too.
The very first step toward creating your private family banking is to watch our masterclass.