As the daughter of entrepreneurs, I regularly tagged along as my mom made daily cash deposits into their accounts. I pictured the teller taking that hard-earned cash and tucking it safely away into the vault. Little did I know that wasn’t exactly where the money was stored. Not only was it not in that vault, if push came to shove and the bank ran out of money, we likely would never see most of the cash again.

Banks are only required to keep 10% of the money we deposit; the rest they loan. As Jimmy Stuart explains in the money-run scene from It’s a Wonderful Life, the money is going to work as loans for our neighbors. However, banks do not simply loan one dollar for every dollar we deposit. Each dollar is loaned 9-12 more times! This is called fractional reserve banking. It does not seem like a winning strategy should a lot of people need their cash at the same time. They gamble on this not happening.

Banks make money on loan interest, but fractional reserve banking is an unstable structure. According to the FDIC website, 561 banks have gone bankrupt since 2001. That’s billions of dollars owed to depositors. But what are our options if banks are a necessary evil, especially for real estate investors? We can begin the journey of starting a privatized family banking system.

Privatized family banking systems are a tried-and-true way to not only warehouse your wealth, but also have quick access to cash, maintain greater growth than a savings account, and still invest in real estate. Sound too good to be true or like an unproven new opportunity? It’s why the Rockefellers are still a formidable financial family. It’s why Walt Disney was able to launch his looney idea for a theme park. And why almost everyone reading this article has eaten a McDonalds’ hamburger. This is called the Infinite Banking Concept. It is what large banks, every fortune 500 company, politicians and the wealthy are doing with their money. We simply make the system achievable for those who wants to grow their wealth in a safe environment; not just the wealthy.

The infinite banking concept uses overfunded life-insurance to operate like a savings account—but with greater security, growth, while keeping liquidity. Permanent insurance policies, when structured properly, are highly efficient and offer tax advantages. Safety? Each policy is a legal contract that must allow access to the cash value and pay death benefit. Insurance companies are also held to a higher standard than banks when it comes to stability. They must keep a dollar in assets for every dollar in liability- no fractional lending allowed. Then there is a growth minimum. The companies we work with have a guaranteed floor—this does not include company dividends that are paid to policy owners, or simultaneously investing in real estate.

We’ll let you know when we find a better option for safely storing and using your cash. Meanwhile, schedule a consultation with us today so we can help you explore your options.

by Olivia McGraw, Unbridled Wealth