Can you really build your own family bank? (Ep. 275)

So at age 85 for him, he will have paid $100,000 in premiums and he would have access to $582,000 worth of cash value and his death benefit would be $703,000. So if you think about that, he paid a little over $100,000 to have access to almost $600,000 and to have a death benefit of a little over $700,000. I mean, that's a screaming deal.

He basically took $1 and turned it into $5, almost $6. Hello, hello, and welcome to the Without the Bank podcast. I'm super excited to be here with you all today.

I thought it would be super fun to go over a case study together. Okay, so let's get into this. I'm super excited to go over this with you all, and I hope everyone is having an awesome day.

So before we kind of get into the nitty gritty details, what I'd like you to do is to zoom out and think about who makes the wheels of the banking industry turn. And if you really think about it, it's consumers, right? Nelson says this in his book, bankers cannot make a loan unless they have money on deposit, which means all of the depositors are making this function. So if you think about everyone in your family, even in your immediate family, if they have deposits at the bank or a loan out, the bank is making money off of that activity.

And again, this happens because of fractional banking. For every dollar you deposit, they can now legally loan out 10. So if you have $10,000 in the bank, they can loan out 100,000.

And we've gone over this before, but if we do that, it is very illegal. So I would not suggest trying to get into fractional reserve banking on an individual level. And this happens generationally.

Like if your parents had a loan or if your grandparents had a loan, and if they had deposits at the bank, what happens is the bank is taking those deposits, making loans, charging interest for it, and being really wealthy over time from that activity. So my question to you all is if you could direct the same energy inward, essentially, and set up a family banking system, because if you own the debt, you get the payment. It's that simple.

And I think that is something that's really hard for the pay cash people to kind of fully wrap their heads around because they just can't get past the, I don't want to have any debt. But bankers love debt because they're getting the payments monthly, right? They don't necessarily want the real estate or the car or whatever it is that they're giving you the loan for. They just want the payments.

That's it. They want the principal and interest. It's a really simple business. So I remember a gentleman that he's got a lot of industry knowledge. And he always used to say, Would you like to make Wells Fargo rich or your own family rich? And he's like, you know, if you don't like your family, maybe you don't want to make them rich. But for the ones that you do, you know, why not? So here's kind of what this looks like on a generational level with a real family out of Tennessee that I helped.

Okay, so how this family came to me is actually kind of a fun story. So this gentleman was introduced to me by someone else. He's like, you know, I think he would be interested in what you're teaching people.

So it's a great love to have a conversation with him. So we sat down and he told me what his goals were, which at the time was to pay off his credit card debt. And he was like, you know, I really think this is going to be a life changer for my family.

And I really would love for my dad to get involved as well. So he ended up getting a policy first. And he was in his young 20s at the time.

And he was married and had a kid. And it took his dad a really long time to come talk to me. I think because he had been burned before.

So his dad's story is that he owned a farm, did farming every single year, and it was pretty lucrative until it wasn't. And essentially, the year before things turned sour, he had told, you know, his banker, like, hey, I think I'm going to stop farming. And the banker talked him into one more year.

I wonder why. And essentially, he wasn't able to make those payments. So things, you know, went on a downhill spiral for him.

And financially, you know, it hit him really hard that he had to make up for what he had lost. And on top of that, he had asked his previous agent if he could do infinite banking because he came across the concept. He read the book.

And his agent told him, no, you can't use your policy like this. So again, I could see why he was suspicious to come have a conversation with me. And he told his son, like, hey, you start this.

And if it works for you, then, you know, I'll have a conversation with Tarisa. So it worked. You know, he used his policy.

His son used his policy to pay off some credit card debt. And I will preface this with, I would not recommend doing that if you don't have discipline, like pay off the credit card debt first so that you can build the habit. But his son had the habit.

He was like, you know, I told him, I was like, this can go wrong if you don't stop using your credit cards and stop accumulating debt in a way that's not beneficial to you. He's like, I understand. You know, I will make sure that I follow this to the T and I'm not adding on to that.

So moral of the story, he gets started. His dad comes to me. I show him how the policy works.

I show him some different options to look at. And he moved forward. And eventually, they asked me to come to their town in Tennessee to come and tell their community about this.

So I flew out and, you know, I don't really get uncomfortable often in front of people. And, you know, I was in a room full of, I'll just set the picture, a room full of farmers. And, you know, here I am, little cute brown girl and this like dress because I was like, oh, this is a professional event.

I'm going to make sure I look nice. Everyone showed up in like jeans and t-shirt. So now I know how I probably should have dressed.

In any case, that was the quietest room of people I had ever spoken in front of. And I like to crack a few jokes here and there just because, you know, I think life can be serious enough. We got to find something to laugh at.

So anyways, I went out, I talked to them, and it was the quietest room of people I had ever spoken in front of. And I was like, man, I felt a little uncomfortable, but that's okay. You know, we're here to share the message.

So what was fun is that we went over their particular story in their town, and that's what I'm going to go over with all of you guys. So let's get into this. So fast forward a few years, and now we have grandpa insured, son insured, grandson insured, and the son's wife.

So we weren't unfortunately able to get insurance on the grandma due to health reasons, but that's essentially how their family system is set up right now. And this is going to be a fun case study of infinite banking at a family level. So for the sake of this, we are going to take each policy out to age 85, just so that you can see how these policies perform over time. And the dad started in his 50s. So I think a lot of people like wonder that, well, you know, is it too late for me? Am I too old? And the answer to that is no, as long as you're insurable, you're good to go, essentially. So the cash value portion of it works really similarly if you're starting in your 50s versus your 20s.

The only difference is the level of death benefit that you're getting. So obviously, if you have a 50 year old and a 20 year old, and they're each paying $10,000 a year in premium, the 20 year old is going to have more death benefit for those dollars compared to the 50 year old. And that just makes sense.

So you're not too old, as long as you're insurable, and you can only find that out if you go through underwriting. So in this example, we will go over the total premiums paid the amount of cash value at age 85 for all parties. And this is considering that there are no additional paid up insurance premiums going into the policy at all.

So it's essentially just scheduled premiums. And that makes sense. So if you're new to infinite banking, paid up additions is the rider that we put on the policy to make sure that you have access to the majority of your cash value immediately.

And you can overfund, meaning you can pay more premium inside of your policy. And that just makes it more efficient. It grows more, and you have more cash value, just like if you were to, you know, put additional money in your bank account, it would just have more money.

So it's that simple. So this is considering no additional premium past the scheduled premium. Okay, so let's get into this.

I'm going to pull this example up. And what's really neat about this is this is now going to be three generations worth of coverage. And that's especially important because a lot of wealth does not go past the third generation.

So if you teach your family good stewardship, if you teach them how to use these policies, if you share with them the importance and enroll them in the education that needs to follow for them to be successful in this, like we can make money last more than the third generation. And I think that that should be the goal. Okay, so we're going to start with the first generation, the grandpa, he started a $20,000 a year policy.

At age 85, he would have paid $533,000 in premium, and he would have access to over $774,000 worth of cash value. So think about that for a second. He put in 533, he has access to 774.

That's incredible. And he's in his 50s. So when someone's like, Oh, this doesn't work for me, I'm older, or let's just get a policy on my kid. I'm like, No, you don't understand. You want to be able to pass on legacy. So it's important that you get yourself covered before your kids.

And total death benefit is $979,000. So almost a million dollars. We also put a convertible term policy on him because obviously, he's getting older, and he was worried about his insurability.

I was like, Look, if you get a convertible term policy, you don't have to go through underwriting again, you can just slowly convert it over to policy set up for infinite banking, and you don't have to worry about not being insured. So he got one of those as well. And he did have a total of $600,000 in prior existing coverage.

I was not his agent at that time. So if you look at the total legacy for him, and this is not including overfunding, it's over $2 million. That is so awesome.

So now we're going to move on. Now we're going to move on to his son. So his son started when he was in his 20s, I think mid 20s.

And he started with $6,000 a year in premium. So by the time he was 85, he would have paid $357,000 worth of premium, he would have access to $1,167,000 worth of cash value. Now here is the benefit, obviously, if you get started sooner, and his total death benefit was a little over $1.4 million.

And, you know, obviously, I'm a numbers gal, I think we've all gathered this. But this is what really stood out to me in reading Nelson's book was what you're paying for and what you're getting is so incredible. If you put $357,000 worth of cash into a bank, it's not going to give you 1.1 in cash value.

And it's also not going to give you $1.4 million in income tax free death benefit. It's just not going to do that. So when we're talking about places to store money, this is why I'm always saying a properly structured life insurance policy is one of the absolute best places to do it.

So now we're going to go on to the grandson. He started his policy, I think before he was two years old. So at age 85, for him, he will have paid $100,000 roughly in premiums, and he would have access to $582,000 worth of cash value, and his death benefit would be $703,000 and some change.

So if you think about that, he paid a little over $100,000 to have access to almost $600,000 and to have a death benefit of a little over $700,000. I mean, that's a screaming deal. He basically took $1 and turned it into 5, almost 6. And if you look at the son's policy, he paid a little over 350 for access to 1.1. And it's funny because even looking at these numbers, I'm just like, Oh my gosh, I'm just constantly reminded about how cool this is. So excuse me while I nerd out over this. So this is a total legacy transfer. So here's the cool thing about this.

What do you think that son is going to do once his father passes away? He's going to take that $2 million and put it into policies. Because why? Well, here are some really cool things about this. It's off the tax radar.

So he receives it income tax-free, and then he puts it into policies, which are not taxed as long as it doesn't MEC. And then it grows uninterrupted compound interest for the next generation. So the son's legacy of $1.4 million, that does not include what is going to be passed on to him.

And the grandson, if he's smart, will absolutely know what to do with those funds. And it is to put it in a place where it's going to grow no matter what. It's going to grow uninterrupted compounding interest, and it's going to receive a dividend.

And you have access to it to do with it what you want. So this doesn't include, you know, the investments that they made with this money. This just includes them paying the scheduled premium.

That's it. There's nothing fancy about it. So I wanted to go over this case study because, you know, it's really incredible what can happen on an individual level.

But when you expand that out to different family members, and, you know, grandkids, you create this ecosystem of cash. So if you need a car loan, if you need a business loan, guess where you're going to go? You don't have to go to Wells Fargo. You can go to your family and say, Hey, this is my business plan.

This is how much I need. Here's how I'm going to pay you back. Here's what's going to happen if I don't pay you back.

And again, that only works if you get along with your family and you can kind of mix money and family. Well, some people can't, and that's okay. But for the people that can, this is a really amazing thing to live into.

Just for the for the fun of it, we're going to add up the total cash value and the total premiums paid just so we can get a well-rounded picture. So for total premiums paid across all of these policies, until each individual is 85, is a total of $991,000. So almost a million.

So for total cash value, combining all the policies, just big picture, it's $2,524,341. So this family paid less than a million to have access to over $2.5 million not to mention what's in the total death benefit. So I hope that is super helpful when you're thinking about, okay, well, how much do I get started with? How does it make sense to get started? The best policy is the one that you start.

It's always better to be conservative and just know that what you're paying for, you're going to have access to that in so much more. So that's why I say if people are just looking at it as an expense, I think you're already losing. Because if you compare it to just paying cash for things, which is probably what you're doing and or using a credit card, you are transferring the power of that dollar that you've already earned away from you forever.

So you're losing on opportunity costs, like what that dollar could have earned you. And you're also losing out on uninterrupted compounding interest. Notice I didn't say this is how much cash value they have, and they're not going to touch it for anything else.

No, they're using their policies. And I remember having a conversation with the son. He's like, you know, Tarisa, I sleep so soundly at night.

And this is the most money I've ever had because of these policies. And it's because he's using it properly. It's because he's being a good banker.

And he feels so happy knowing that his family members are covered and doing the same things. They're putting their dollars to work for them full time. So this is what one family created in just two years.

So my question for you is, what do you want to create for yours? What are you already saving per year? And maybe that's a good place to start. If you're already setting aside those dollars, then maybe you need to change the location because that amount of money in just your mattress or a bank account is not going to do what it can for you if you put it inside of a properly structured whole life insurance policy. Try to say that five times fast.

And this is, I don't know, kind of an aside, but my son, he's almost two. And so we're looking at getting him into some Montessori-style schools. I grew up in Montessori-style schooling, which I really loved because it created me to be more of an independent thinker.

I like to work on things in my own way. And it was really important to me making sure that where he is going is going to be the best environment for him. And so I toured a lot of schools and I ended up with one that ironically, one of my former classmates is the VP at that school.

And she's like, Do you remember me? And I was like, Oh my gosh, I do. She's like, Yeah, my kids go to this school. You know, my daughter would be in your son's classroom.

And it just made me feel so comforted. And I think the same is true if you're thinking about not trying to compare money to children, but I'm just saying like the right environment is one of the most important things for anything, for people you love, for your money, for your mental health. So just think about like what I guess what I'm saying is, you should treat environments with the same kind of scrutiny and importance, because it makes a difference.

So if you're going to ask a ton of questions of, Okay, what is my kid going to be learning? Who's he going to be around? You know, what habits is he going to be picking up? The same is true for where you should be putting your money and what questions you should be asking. What is this doing for me? Why is it important? Is this helping me reach my goals? Is this a safe environment for my money? So all that to say, I feel good that he's going to be in a place that I know someone and, and he's going to be brought up with the same kind of teaching that I was that makes me feel really good. And I want everyone else to feel really good about what environments they're putting their money in.

And as you can see, I mean, obviously, this is to age 85. So it's kind of like the tortoise and the hare. It's not the sexiest thing ever.

But what is so cool about it is the fact that it is guaranteed to grow contractually. And this is a fun thing. If you live past your contract date, so like most policies go out to age 121.

So if you hit age 121, what they do is they just give you a check, you know, for whatever the death benefit would have been, they say, Hey, they just give you a check for whatever it is at that time. So instead of paying out a death benefit, they just give you a check and they say, Hey, congratulations, you've made it to age 122. So that's what happens if you, if you live past your contract date, it's guaranteed to grow contractually.

And there's just not many things that exist that get better over time, maybe except for wine. Maybe that's the exception. In any case, I hope this was really helpful for you all.

If you have any questions, please email me tarisa@withoutthebank.com. And I look forward to hearing what's on your mind or what you want me to talk about. And I hope you have an amazing rest of your day. Thank you for listening in.

And I will say if you found this valuable and you happen to have one or two minutes left after listening to this, please send it to someone that you care about and write us a review on the podcast. That would mean a lot to us. Alright, have an amazing rest of your day.