The Family Bank Strategy is the very best way to manage your cash-flows. It answers the question: what is the best way to save and use money throughout your life?
When it comes to utilizing your money, modern conventional wisdom says you have two options:
- Pay a financing institution interest to use their money (ex: when financing a car, the car ends up costing us more because the interest we pay the bank).
- Purchase something with cash and lose the interest we might have earned, this is called opportunity cost (ex: by paying cash for a car we lose the earning power of that cash had we invested it).
The Family Bank Strategy teaches you how to avoid using bank loans to make purchases. More powerfully, it allows you to recoup the entire lost opportunity cost associated with having to spend money rather than invest it.
It works like this: you purchase and capitalize a particular type of life insurance policy designed in a specific way. It’s called dividend-paying whole life (the Family Bank Account). The policy is specially designed to maximize the living benefits known as cash value and minimize the death benefit (the very opposite view most individuals have of life insurance). The whole life policy goes to work like a savings account providing security, a guaranteed rate of return and tax free growth. But most importantly you also have the ability to access your funds at any time.
The freedom to access your money at any time is the real power of this account. The life insurance company guarantees your cash value can be used as collateral to take out loans from the insurance company call policy loans.
Policy loans are a unique type of debt. There are no applications, additional collateral assignments, or restrictions on use of the funds. But most importantly, the use of policy loans does not impact the compounding growth of the cash value. Allowing you to truly save money and use it at the same time without impacting your savings (think about that).
Think of properly structured life insurance as an and asset, not an or asset. You aren’t choosing between the Family Bank and an investment. Rather your money can compound in your Family Bank even as the very same dollars are being used in your business, investments or major purchases. This allows the same dollar to earn two rates of return simultaneously!
So instead of losing access to your money in a 401(k) or IRA, and using a bank for major purchases and investments – what about capitalizing an account you own and control. This account will also satisfy the need to finance everything in your life. As you repay your policy, the same way you would to a traditional bank, you are the one who recaptures interest. In essence, creating your own Family Bank.