INFINITE BANKING HAS TIKTOK BUZZING, BUT IS IT FOR YOU?

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.

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But infinite banking is nothing new. 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.

Nash promoted infinite banking as a path to financial freedom and wealth creation. But it’s a little more complicated than Waka Flocka Flame and TikTokkers claim.

HOW INFINITE BANKING WORKS

Whole life insurance policies usually last your entire life and have a cash value component that grows at a guaranteed rate over time. 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.

Once your policy has accumulated enough cash value, you can begin to take out loans against the funds — and that’s where the concept of “banking on yourself” comes in.