How to Be Your Own Banker With Life Insurance
“Well then, you should have put my money on deposit with the bankers, so that when I returned I would have received it back with interest.
28″ ‘Take the talent from him and give it to the one who has the ten talents. 29For everyone who has will be given more, and he will have an abundance. Whoever does not have, even what he has will be taken from him.” (Matthew 25:27-29)
Who makes most from the money with the money that you earn during your lifetime? You would think that it would be you, right? It’s your money! But that would not be accurate. The Financial Institutions, including Wall Street firms, Insurance companies, Credit Unions, and Credit Card Companies make far more money on your money than you do!
When you earn money, what happens to it? You send it to the bank to sit there until you need it. They then turn around and lend out ten times as much money at interest using your money as the reserves to secure these transactions. You’re probably earning little to nothing on it.
What about when you buy a house? The bank lends you the money, and then you pay them interest for 15 to 30 years. They then profit on the next 30 years of your income. We’re not going to list each and every financial transaction that you make, but if you think about it, the banks are involved in all of them and turning a profit along the way.
Please understand that we’re not in any way saying that what these institutions are doing is wrong. Sophisticated banking has lead more than anything else to the incredible wealth of modern civilization over the last 200 years. Along the way, some of these bankers have periodically caused some of society’s biggest problems when they leave principles behind and play shell games with other people’s money. But here we’re focusing on honest banking principles that have lead to prosperity which Jesus said was the least that should be done with money (Matthew 25:14-30).
What are your other options? Use your Whole Life insurance policies as your own bank. This might not be the primary intended use of them (although it may have always been a secondary purpose behind them, we’re not sure), but they facilitate personal banking where you can retain the profits very well. This is a concept which is not easily elaborated in the amount of space that we have, but a great book on this subject is Nelson Nash’s “Becoming your own Banker.”
Here we’ll simply introduce the concept. Before becoming familiar with Mr. Nash’s work, the way we primarily taught to use the cash value of Whole Life insurance as a springboard for other areas of our financial life was to focus on the creation of new assets. We’ll focus more on this when we discuss the Storehouse soon. Mr. Nash barely touches on this subject in two pages of his book, but spends most of his time showing how you can utilize your whole life policies to replace the lending function of banks in your life.
When buying a large item such as a car or house, there are a number of ways to buy it. The most typical way is to borrow money from the bank and then pay them back over time. Instead of doing this, if you’ve planned ahead by funding your whole life insurance, you can borrow the money from your policy and schedule a repayment plan to pay yourself back with interest. By doing this, you are able to earn the interest in the transaction that the bank would normally earn. When you compare this to the other option, you come out far ahead. Of course you must have planned ahead.
Another way to plan ahead is to simply save up cash in a bank until the day the purchase is needed. However, you come out ahead of paying cash when you borrow from your own whole life policy. The truth is that you always finance everything you buy. When you pay cash, you lose all future use of that cash and it’s ability to earn an income for you, so you either pay interest for borrowed money or you give up interest that you weren’t able to earn because you gave up use of the money. It can be clearly shown that being your own banker, by being both the borrower and the lender, is more profitable to you then either paying cash (using money that’s been stored in a bank) or by borrowing from the bank (simply being the borrower).
This is not to say that it’s always a bad idea to use the bank’s money for a transaction when you have the money available within your policies. There are not absolute rules in good stewardship, the key is to be educated and prayerful to make the best decisions as they come along.
I (Wes) had lunch with Mr. Nash sometime back and had been wanting to ask him a question. My problem was this: if you had good investment opportunities and you’re in an environment when the government is selling out the future of this country in order to keep interest rates incredibly low, why wouldn’t you take advantage of these really low interest rates. His book is more philosophical and doesn’t really address this issue. He agreed that you’d be foolish (purely financially speaking and not taking into account any other factors) to not take the practically free money that is being given away right now.
But this environment will not last much longer, and we are talking about planning for the future. Banking will tighten up. Interest rates will be higher. Shouldn’t you assure yourself the ability to be the one who profits on your future banking needs rather than allowing the banks to be the one who profits from your endeavors?
This is Part 10 in a series on Whole Life Insurance. You might want to read the introduction to this series which will link to each post in the explanation of whole life and Ben’s story showing how whole life is used in a variety of ways in his life.
Photo credit: My Savings Tips