They then treat it as a personal line of credit and borrow against the policy’s cash value to pay for large purchases instead of relying on traditional lenders or dipping into savings.īut cash value life insurance can be complex and pricey, and infinite banking is a nuanced concept. Infinite banking takes it one step further: Policyholders pour extra money into the cash value to speed up growth.
When you pay your life insurance premium, a portion goes to the policy’s cash value component. This rate of return varies among insurers, but it’s typically around 5%, Barry Flagg, a chartered life underwriter in Tampa, Florida, and the founder of the life insurance research company Veralytic, said in an email.Īnimatronic dragon bursts into flames during Disneyland show Whole life insurance policies usually last your entire life and have a cash value component that grows at a guaranteed rate over time. But it’s a little more complicated than Waka Flocka Flame and TikTokkers claim. Nash promoted infinite banking as a path to financial freedom and wealth creation.
The term was coined by economist Nelson Nash in the 1980s and outlined in his 2000 book, “Becoming Your Own Banker: Unlock the Infinite Banking Concept.” The strategy involves tapping into the cash value of certain life insurance policies like whole life and treating it as a personal bank. Scroll through TikTok’s finance feed and you’ll come across viral videos on “infinite banking.” The concept is making a splash on social media, fueled by celebrities like rapper Waka Flocka Flame.īut infinite banking is nothing new.
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