Madhvi explains how banks profit from the gap between deposit rates (1%) and lending rates (8%), then shows how Infinity Banking lets you capture that spread yourself using leverage similar to what banks use.
Chapters
Hello everyone. My name is Madhvi.
I'm the president of Think Outside the.
Stocks and also a wealth strategist.
We are going to talk about a.
Class that has never lost money, even during the Great Depression. And the concept is called Infinity Banking.
And I'm going to pop up here real quickly to tell you about why this concept, knowing this concept is important.
For you and why you should be interested in this.
So I'm going to quickly share my screen and talk to you about what.
This banking concept really is and why should you know it. Let's think about the power of leverage. Being your own banker is all about this leverage.
And for that let's look at the.
Business of the bank.
For a bank, when you provide the bank, say $10,000, the bank promises about 1% these days, 1% interest back to you in that year, you get about.
$100 interest, don't you? Well, that's before the tax. But anyway, that's not the point here.
And suppose that somebody else takes a.
Loan or you take a loan of say same $10,000. Remember, the bank does not have any money to start with. It's holding your money, $10,000 and it's just passing on as a loan to somebody else.
And suppose on an average the bank.
Is providing 8% rate for that loan. Now I'm not talking about the mortgages.
Here, I'm talking about just an average.
Remember, the credit card has really high interest rates. So with that 8% SIP, bank gets interest $800 back. Now you would say that is $700 gain in a year. Again remember, bank did not have anything to start with that 800 minus $100. That $700 gain, that's almost 700% gain for the bank. That's their profit. And think about it. This does not even include the fractional reserve that bank is supposed to keep, which is just about 3 to 10% of that $10,000. So this is the power of leverage. And in your savings and investment strategy.
Which is two commingling strateg strategies together, you could definitely use this power of.
Leverage for your own benefit. And that's the concept, the infinity banking concept.
And I will look forward to see you on Thursday pretty soon.
