The best way to answer the question, “What is Infinite Banking?” is to let the creator of the concept explain it to you. The following excerpt is from the book, Becoming Your Own Banker, by R. Nelson Nash.
“This book is not about … investments of any kind. It is about how one finances the things of life, which can certainly include investments. It is not about rates of return. As time goes by interest rates are up and interest rates are down — but the process of banking goes on no matter what is happening. It is a well known fact that banks make more money during times of low interest rates than when rates are high.
A word of caution is in order — later in the book you will be looking at illustrations of life insurance policies that show how the concept works as compared with how most folks go about solving their financial affairs. Most of the illustrations were developed in 2000 and represent dividend scales in effect at that time. Presently, interest earnings are lower and, hence, dividend scales are lower. But in comparison with other methods of financing the things of life, the difference in results remains the same.
It is not a procedure to “get rich quickly.” To the contrary, it requires long range planning. I’m educated as a forester, having worked in that field as a consultant for ten years; I tend to think seventy years in the future. I won’t be here — and neither will you — but there is no reason not to behave in this manner. “Plan as if you are going to live forever and live as if you are going to die today” appears to me to be a good thought. One can learn how to plan and act intergenerationally. That’s one of the primary advantages of having been a forester. I learned to think beyond the lifespan of my current generation.
Becoming Your Own Banker is not a tax-qualified idea of any sort. The Income Tax Law, as we know it today, has only been around since 1913. Life insurance has been around for over 200 years and is not a creature of any tax code. It is nothing more than like-minded people contracting with one another to solve a financial problem.
There is no such thing as “having too much money in the bank.” Wealth must reside somewhere. What better place to have it reside than here?
From this residence one can do anything that one can conceive. This is an advantage that most folks ignore in their thought process, and therefore, limits their effectiveness.
Let me make it abundantly clear—I am not talking about a bank in the conventional sense of the word. I am demonstrating that one can use dividend-paying whole life insurance to solve one’s need for finance throughout one’s life.
Hopefully, this book will give you a new perspective on the idea of “retirement.” I prefer to use the words, “passive income.” That is money coming in that you can count on and you don’t do anything to earn it at that time. Study the illustrations carefully and you will see that very high premium, dividend-paying, whole life insurance is the ultimate vehicle to produce such income.
The Infinite Banking Concept is a major paradigm shift for most folks. It will require several thorough readings for a full understanding of its message. The concept is not complicated, it is just different from the way the majority thinks and behaves. In fact, it is the ultimate in simplicity.
There is an extensive reading list in the book and you are encouraged to read them all. Education is an on-going process and there is no such thing as having “arrived” in knowledge.
There have been many people that have had a glimpse of what this book is all about but none, to my knowledge; no one has put together a comprehensive rationale such as you will see here. Read it with an open mind and you will discover a whole new financial world”.