The business of banks is money. We all use banks. But are we truly benefiting by storing money with them or are they? Have you ever considered how banks make money? How much money do they make?
Consider this example based on recent numbers from Bank of America. Let’s say you deposit $1,000 and they pay you 0.2% interest for storing your money with them. And because of the fractional reserve system in our country, they only need to keep 10% of your money on hand at any time. So they loan out $900 of your dollars at an average of 5.2% to people buying homes, cars, or using credit cards. You might be thinking, okay they make 5%, that’s not bad, I can probably get that in the stock market.
But because they never use their own money, they pay you $2 to make $46.80. That’s a 2,340% return on investment! That’s like if you bought a share of a company when it was worth $2 and then it grows to $46.80. The total deposits Bank of America took in during the year 2017 were $860 billion.
This alone should tell you that banking is a very profitable activity and that banks are masters at controlling money. The average American pays over $8,000 a year in interest for mortgages, cars, student loans, and credit cards (Simple Dollar).
Where it gets even more interesting though, is when you look at banks’ balance sheets and where they’re actually storing our money when they aren’t loaning it out for profit. Let’s stick with Bank of America for this example. At the end of 2020, they owned $20.38 billion of whole life insurance. What? That number is almost double their real estate holdings!
If you’re like I was 2 years ago, all you’ve heard about whole life insurance to this point in your life is that it is a BAD place to store money.
But now you have a conundrum. Why is not only Bank of America, but every major bank in our country putting as much money as the federal government will allow them into whole life insurance policies? Do they have access to things that you and I don’t? OR are they using financial tools and assets differently than you and I have been taught?
Here’s a final quote to leave you from financial expert Ed Slott “The single biggest benefit in the US tax code and the most UNUSED is the income tax exemption on whole life insurance.”
So what is whole life insurance? And why should it matter to you?
Schedule a free educational call today to learn more. https://calendly.com/jacarlson/meet-with-jack
by Jack Carlson, Wealth Strategist Unbridled Wealth