Infinite Banking Concept:  The Pros and Cons

The infinite banking concept describes a way for everyday individuals to take charge of their finances and grow their wealth. Popularized by R. Nelson Nash in his book “Becoming Your Own Banker,” this concept essentially lets you become your own financial institution.

When you borrow money from a traditional bank, they will charge you interest. Every month, some money will leave your bank account to pay for that purchase (on top of the purchase price), and you permanently lose that capital.

Now imagine if you could somehow find a way to put those interest payments back in your pocket. Imagine if those interest payments and original purchase price all continued to compound FOR you and build your wealth. That is the power of infinite banking… and it's available to the average person!

This post will discuss how exactly infinite banking works, some pros and cons of infinite banking, and answer some frequently asked questions about it. Ready to improve the cash flow in your life while still building a nest egg to leave behind? Let's dive right in.

How Does  Infinite Banking Work?

Called many different names, including the perpetual wealth code, cashflow banking, and the money multiplier, infinite banking involves borrowing against yourself using a participating whole life insurance policy. (You don't need a whole life policy, but it's the best vehicle to use).

To go more in-depth, whole life insurance has a cash surrender value, AKA a cash value. This value is the amount of money that the insurance company makes available to you if you cancel the policy. With participating whole life insurance policies, your cash value goes up every time the company pays dividends.

Pros and Cons of Infinite Banking


One of the biggest pros to the infinite banking concept is that your compounding goes uninterrupted. Imagine if you were to pay in cash every few years to buy a new car or make real estate investments. You can make purchases like cars and houses with infinite banking, but leave your compounding uninterrupted. Over the long run, this makes a big difference in your net worth. Because of this, even if you DO have a great investment vehicle, compounding gets interrupted continually…

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