For those who have heard the Self-Empowered Banking introductory presentation, you may remember that there's a question asked: Would someone make money by borrowing $10,000 for two years at 6%, and then putting it in a CD at 4% compounded for two years? Is this a good deal?
By using the
To most people, it seems a bad deal -- it appears they would lose money, or would they? For those who understand the power of compound interest -- they would take the deal. And, they would be absolutely right to do so. In this scenario, if they paid off the loan in two years, the cost of that loan is $637 (rounded off). The amount of interest earned on the 4% compounded savings is $832 -- they make a profit of $195.
Now, let's apply the same thinking to financing a college education -- whether it's the first 4 years or an advanced degree. As we all know, the cost of a college education has skyrocketed -- inflation on tuition is almost double that of the general inflation rate -- that's almost 8%. Learn more here: TUITION INFLATION
Only the very wealthy can afford to pay cash, while the rest of us are borrowing from Uncle Sam through the student loan program or some other supplementary financial aid. BUT -- even if you can pay CASH - it's better to finance your or your children's college education. Why you may ask?
You do not have to make a payment on these loans for 4-8 years depending how long you or your children are in school -- they only come due when the student quits or graduates. During that time, your wealth will continue to accumulate. As a result, you will be in a better position to pay off these loans if you keep your cash and let it work for you in a Self-Empowered Banking System (SEBS).
Besides the typical benefits of a SEBS
, in this case, a SEBS has another advantage, especially if you already have a high net worth, which might prevent you from getting a tuition loan. In most cases, your net worth is visible to all potential lenders when it resides in typical investment vehicles - banks, CDs, 401Ks, etc. Because of the financial instrument your SEBS uses, the money held there is not visible to anyone unless you tell them about it.
Here's a story from one of our clients who teaches economics in New Mexico, mainly to disadvantaged students. Our client is an intense student of Self-Empowered Banking
(SEB) and knows what a difference it has made in his life. Here's how he's changing others lives. Please note: where we felt that terminology needed clarification, we did so, and these words appear in this article without italics and underlined
I have about 120 high school economics students who for the most part could care less about their futures, but out of the masses there are 8 students interested in working hard to exceed expectations.
We have started an informal group that discusses politics and economics during lunch. After sharing a small fraction of how privatized banking works, the students eyes brightened.
After several more discussions and giving them printed copies of some recent Lara-Murphy Reports (LMRs), one student asked me about his idea today to make money while he is in college and law school.
Share this scenario with some of your expert friends to see what they think of his idea.
1. Take out the maximum allowable SUBSIDIZED loan each and every semester.
2. Pay only school expenses with the loan. Everything else goes into a SEB system. Let's also be realistic here -- most students will supplement this with a part- or full-time job.
3. Because you are essentially getting 7+ years of interest free loans that are growing in secret [in your SEB], you are getting Uncle Sam to capitalize your banking system.
4. Towards the end of your school years you evaluate the return from your SEB and the impending monthly bill for loans and you make the decision to repay your loans in a lump sum or to pay them gradually from the dividends and interest your policy earns. (We say, pay them off and then pay yourself back!)
5. Whichever method you decide to use you have a capitalized banking system for when you are ready.
Also, I have been sharing with students the tool from the Privatized Banking Center about how investing early yields a greater opportunity to build wealth. It is a slow process with most of them, but it is exciting to see them grasp these concepts.
Working with a population of students considered to be 100% economically disadvantaged is encouraging me that it is never too early to start changing your life. There is hope for the future.