Did you know that your local bank has the ability to loan out money that you deposit 7 different times? Each time the bank loans someone money they charge an interest rate. Therein lies the secret of the way banks make so much money! They are lending and collecting interest on your money sitting in their bank.
We utilize Your Family Bank to fund future purchases for our clients. Many individuals when purchasing a car see 2 main options… Cash or finance. Both have their positives but in turn, both come with negatives that until Your Family Bank were unavoidable.
When purchasing a car with cash, you receive the vehicle with no payments to a lender and paying no interest. The saver who paid with cash, now has the depreciated asset (car) and has spent their $30,000. Because they no longer have the $30,000, they lose out on the opportunity cost of making money on that $30,000.
The person who finances their vehicle, didn’t have to spend the $30,000 out of pocket, but over the life of the loan they will end up paying $3,334 extra in interest payments to the lender. At the end of the life of the loan, they have a depreciated asset (car) and are “out” $33,334.
The individual who purchases their vehicle using their Family Bank, loans themselves the money to purchase the vehicle. This is the money that they have saved using the Your Family Bank concept. Because they loaned themselves the money, they still have an opportunity to make money on their asset. Over the course of time, this individual will be “The Bank” paying themselves back each month. When all is said and done, this person will have the car, and will have paid themselves back the $33,334 and can now purchase a new car, take a trip, or set their sights on a retirement property.