Infinite Banking is a financial strategy based on the concept of using a specially designed whole life insurance policy as a financial tool to create a personal banking system. The strategy was popularized by R. Nelson Nash in his book “Becoming Your Own Banker.”

Here’s how the concept works:

Purchase a Whole Life Insurance Policy: Instead of using traditional savings accounts or investing in other financial instruments, the individual buys a whole life insurance policy from a reputable insurance company. It’s essential to choose a policy that provides favorable guarantees and dividends.

Accumulate Cash Value: Whole life insurance policies have a cash value component that grows over time. As the policyholder pays premiums, a portion of these payments goes into the cash value account. The cash value grows on a tax-deferred basis and earns dividends (profits) declared by the insurance company.

Borrow from the Cash Value: Once the cash value has accumulated, the policyholder can borrow money from it. This loan is typically low or even interest-free and doesn’t require credit checks or approval from a traditional lender. The policyholder can use this borrowed money for various purposes, such as financing purchases, investments, education, or emergencies.

Repay the Loan: The policyholder has the flexibility to repay the loan on their own schedule. While it’s not mandatory to repay the loan, it is advisable to do so to replenish the cash value and keep the policy in force.

Repeat the Cycle: As the policyholder borrows and repays, the cash value continues to grow and earns dividends. This cycle can be repeated multiple times throughout the individual’s lifetime, creating a personal banking system that provides access to capital whenever needed.

Key Benefits of Infinity Banking:

Liquidity: The cash value in the policy can be accessed quickly, providing immediate access to funds without the need to go through traditional banking processes.

Tax Advantages: The growth of cash value in a whole life insurance policy is tax-deferred, meaning the policyholder won’t incur taxes on the gains until they withdraw more than the total premiums paid.

Stability: Whole life insurance policies provide stable returns and guarantees, offering a level of security and predictability compared to other investment options.

Control: The policyholder has more control over their finances, as they become their own source of financing and can use the funds as they see fit.

Legacy Planning: In addition to providing a personal banking system, whole life insurance also offers a death benefit that can be passed on to beneficiaries, making it a part of estate planning.

It’s essential to note that infinity banking is a financial strategy that requires careful planning and consideration. It may not be suitable for everyone, and individuals should consult with a financial advisor or insurance professional to determine if it aligns with their specific financial goals and circumstances. 

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