By Teresa Kuhn, JD, RFC, CSA
With interest rates at historic lows, it’s no wonder many
people, perhaps even you, have decided that the mattress/coffee can method of
cash management is looking better every day.
The virtual freezing of interest rates by the Federal
Reserve, which has been a boon to mortgage applicants but a punch in the gut
for savers, does not look headed for a thaw anytime soon. The Fed has repeatedly indicated its’ aims to
keep the rate between 0% and 0.25 % until
at least 2015.
Couple that with the steady, erosive force of inflation,
which some experts believe is actually around 8% (versus the 2-3% of “official”
statistics) and you get some insight into just why it seems the average
American can’t get ahead.
Obviously, traditional safe cash management tools are coming
under scrutiny from savers who are looking for any relief they can get from
artificially low interest rates.
One popular way to achieve a measure of liquidity, safety,
and higher rates of return in the past was to “ladder” certificates of deposit.
Laddering involves buying a series of CD’s with incremental
maturity dates and was a method employed by people looking for higher returns
than a money market account, but still in need of some liquidity.
Bankrate.com’s Craig Guillot gives an example of how the
laddering strategy is supposed to work:
“For instance, a person might invest $50,000 by buying 10
CDs with maturity dates every six months. Each CD acts as a rung on the ladder
and as each CD matures, the money is reinvested in a long-term CD, typically
five years. The proceeds are then reinvested into more long-term CDs, but as
each maturity date arrives, the holder of the CD ladder has the opportunity to
put those funds into higher yielding CDs or access the cash penalty-free if
need be.”
Success using laddering, however, is dependent upon excess
yields stretching out for many months and years, and most financial experts
just don’t see that happening anytime in the near future.
Add to that the fact that laddering ties up your money for
five years or longer and you can easily see why it’s not a very appealing idea
for most people.
So, if you can’t rely on banks and their products, such as
CD’s, where CAN you park your cash so that you can keep pace with inflation,
access your funds when YOU need them, and have a measure of proven safety?
Of course, I recommend Bank on Yourself ® as the
ultimate cash management tool.
Now, I know what many of you are thinking:
How can becoming one’s own personal bank possibly address
the issue of inflation if true inflation is over 8%?
Well, for one thing, the type of insurance companies
approved for use by authorized Bank on Yourself advisors have most of their
investable assets places in long-term, high-yield bonds.
These bonds are exceptionally high quality instruments whose
interest rates generally increase as inflation increases. After all, the Fed can only keep the lid on
the boiling cauldron so long before they are forced to start raising interest
rates. The kinds of bonds backing a BOY
plan are poised to take advantage of this when it happens.
I have found that BOY plans do as well, or even much better,
than other vehicles when it comes to keeping pace with inflation. An additional advantage of BOY is the fact
that with investments such as stocks and mutual funds, you could wind up losing
not only the purchasing power of your money, but your ENTIRE investment. Many of us have seen large chunks of our
money disappear just that way.
Also, if you build up equity in your Bank on Yourself
policy, you have the flexibility to use that money to take advantage of
investment opportunities that come your way, knowing that the balance of your
BOY money is still growing, no matter what happens to your other
investments. This is priceless peace
of mind that most other financial strategies just can’t provide.
Another great feature of a correctly-designed BOY policy is
that its’ efficiency will actually increase every year, giving you a cash value
and death benefit which are guaranteed and which grow exponentially. This is due to the special way in which Bank
on Yourself policies are structured.
The dividend-paying whole life policies backing BOY ensure
that it is a much more solid, stable, and secure cash management tool than
anything offered by banks these days.
Add to this the attractiveness of being able to call your own shots when
it comes to accessing and using your money, and you can see why I recommend BOY
as the cornerstone of all my clients’ financial plans
.
But, don’t just believe me.
Do your own research.
Call my office at (800) 382-0830 or go to www.livingwealthyfinancial.com and I will be glad to send you a free
information packet loaded with resources to help you determine whether or not Bank
on Yourself is right for you and your family.
