What is Infinite Banking?

Infinite banking is a concept created in the 1980s by the late economist R. Nelson Nash that centers around individuals becoming their own bankers. Infinite banking proposes that individuals can exert greater control of their finances by creating and managing their own banking functions.

The concept outlines that financial freedom can be achieved if individuals use dividend-paying, whole life insurance to establish their own banking system.

The IBC’s official website, which also serves as the website of the Nelson Nash Institute, states that “Our vision is a free society characterized by creative privatized banking solutions independent of government intervention.”

What is the premise of infinite banking?

The premise of the Infinite Banking Concept® (IBC) is that with the right tools and strategies, anyone can become their own banker. Specifically, the IBC asserts that individuals can leverage whole life insurance policies to borrow from themselves, rather than a bank.

This is possible because whole life insurance policyholders are able to borrow against the whole life insurance policy’s actual cash value. In other words, you can use the whole life insurance policy you have taken out as collateral to borrow from yourself throughout your entire life.

This means that individuals can use IBC to finance a range of assets, from their home to their child’s college fund.

Another critical component of infinite banking is that policyholders can grow their wealth even as they continue to borrow from themselves. Whole life insurance policies allow policyholders to earn dividends from their policy, so the cash value of the policy should grow as time goes by.

Infinite banking also seeks to take advantage of death benefits. One of the key features of whole life insurance is that death benefit payouts are guaranteed (that is, as long as the policyholder has paid their premiums). That means that when you pass, your death benefit will be given to the beneficiaries named in your life insurance policy. In turn, the beneficiaries can establish an infinite banking system for themselves, thereby contributing to generational wealth.

The Infinite Banking Concept® is heavily influenced by Austrian economics. An ardent follower of the Austrian school of economics, Nash once described IBC as “Austrian economics in action.”

It's important to make the distinction that infinite banking is not the same as whole life insurance. Whole life insurance is the vehicle through which an individual can achieve infinite banking.

What are the benefits of infinite banking?

This concept offers a range of potential benefits including:

  • Improved cash flow and liquidity.
  • Access to certain tax benefits (e.g., a guaranteed tax-free death benefit).
  • Whole life insurance is a non-correlated asset, so it's not subject to stock market fluctuations.
  • Ability to earn dividends.
  • Greater control of your finances.
  • The opportunity to generate generational wealth.

What are the drawbacks?

Infinite banking also has several drawbacks including:

  • The need to qualify for an appropriate life insurance policy to get started in the first place.
  • The need to contribute a substantial portion of your income (around 10%) to your policy every month.
  • The cash value of most policies will take several years to break even.
  • It's a niche concept with many intricacies that may be difficult to grasp and adhere to.
  • The need for a strong sense of discipline to see the concept through.
  • Borrowing from your policy is still a type of loan with its own risks.

How do I learn more about it?

Anyone interested in learning more about infinite banking can read Nash’s best-selling book on the matter, ‘Becoming Your Own Banker.’ It is also possible to attend or watch an IBC seminar or consult an Infinite Banking Authorized Practitioner.

Infinite banking is an innovative approach to banking that many people have found beneficial. However, it's vital to do your research before diving in, as it has a number of drawbacks that should be kept in mind.