Top 4 Keys of The Infinite Banking Concept (IBC) for Canadians

Let’s face it, as Canadians, we are bombarded with ideas, strategies, and concepts from the USA all the time. It is tough to get clear and concise information on what works in the frozen north. Ok, this sounds like a great idea but how does it work in Canada? It’s like the maple leaf has us “on guard” for anything negative that can happen.

I know the feeling. As a Real Estate Investor who’s spent a ton of money to learn creative financing, lease options, rent to own, wholesaling, rehabbing, short selling and just about every real estate method out there… the devil is in the details. In fact, it was this journey that ultimately led me to learn and understand the Infinite Banking Concept (IBC) taught in R. Nelson Nash’s book “Becoming Your Own Banker”.

Much like you, I’d met “gurus” and coaches of all kinds in the Real Estate and personal development space. Overall, most of the ideas were solid and could be implemented. The issue was always the little things that could make the deal go south when it was crunch time.

The good news is that IBC is really a Concept… it’s even in the title. After coaching with Nelson for some time, I have a better understanding of why he coined the name.

“Infinite” – because if something is finite, you place a limitation on it. It is infinite because the power of the human mind is just that. It is about our creativity and the ideas that we may come up with to implement this cash flow management strategy on our road of life.

“Banking” – An action word. It is used in this context to both describe the flow of capital from one place to another as well as the warehousing or storage of capital. For example, Canadian Blood Services would store donated blood in a “blood bank.” In any good Canadian winter, roads need to be cleared and plowed which stores the excess snowfall in a “snow bank.” Every Christmas many Canadian families support those less fortunate by increasing the deposits into the “Food Bank.” In much the same way “privatized banking” using well structured high cash value Participating Whole Life Insurance can mimic this same process, but for the average Canadian family.

“Concept” – something conceived in the mind, organized around a central idea or theme. Just like auto manufacturers will come out with a “Concept Car” every year at the annual car shows, these ideas are the things that are possible. Just because they build the concept car doesn’t mean it will enter full production. IBC is based on sound financial principles of savings and accumulation, and treating the usage of your own capital resources with a cost (an opportunity cost). By implementing this Economic Value Add (EVA) principle, by default, you will have created a heightened level of forced saving and increased discipline around the usage of your money.  This reduces or eliminates your dependency on outside financing resources over time.

So what are the four keys of IBC?

It’s straightforward. These four keys all tie to the liberation of your savings with some essential efficiencies and the right mindset to put it into action.

1. Control and Access of Your Savings.

You want to be in the driver’s seat of your financial life and stop abdicating the responsibility of it to other people. Therefore, you require a safe, predictable, storage location for your wealth and savings that provides a high level of liquidity, is efficient, protected or insulated by various market risks and geopolitical turmoil, and is insured in the event something dire were to happen to you. This includes contractual access, no government restrictions, no fees for using or accessing your cash, and tax-deferred, with potential tax-free, access.

2. Uninterrupted Compounding.

One of the largest destroyers of wealth is something we generally cannot see. It is the lost opportunity cost of our own capital as we send it out into the world to pay for the things of life. Things like cars, trucks, computers, Christmas gifts, vacations, child’s education, renovations, taxes, investments (some of these don’t work out – creating a double pain event), charitable causes and tithing, to name a few. By honouring the mindset of an “HONEST BANKER” who pays themselves first, uses their growing capital, and combines it with the efficiency of Specially Designed Participating Whole Life Insurance Contracts, you can establish a compound effect. Best of all, there are both guarantees and the potential of consistent long-term dividends to augment this method, over a lifetime. The Policy Owners behaviour is critical to the process.

3. Flexibility

Life has a way of throwing curveballs at us all. It is dynamic, changing and often unpredictable from week to week, year to year. The Canadian economy, job market, fluctuating oil price, the rapid increase in technology, family changes and many other factors directly impact your family and business cash flow. Building a measure of flexibility into a well-designed IBC strategy creates peace of mind, reduces stress, and can allow for better financial decision making over the long haul. When you are empowered with knowledge on how these Par Dividend paying contracts work you can have a reasonable level of control over your premium deposits, rider options, contract adjustments, collateral loans or policy loans and the repayment terms of these loans.

IBC is not for everyone. It is also not a magic financial “cure-all,” and it is not intended to be a replacement for your retirement fund or retirement accounts. But for those that implement and have a basic commitment to their long-term financial success it can be as Nelson Nash says:

“A peaceful, stress-free way of life that is ridiculously simple.” An Authorised practitioner who is well versed in Nelson’s teachings can show you how your money can work harder by doing several things at once while being stored in one of the safest and most protected places for your cash in the country. For the right person, it can be an effective method to grow your wealth more securely, a technique to use your assets to help fuel other strategic investments or business growth, and a traditional savings vehicle that will most likely leave your bonds and GIC’s in the dust.

4. Lifelong protection and tax-free transfer of wealth

By implementing this concept, using participating dividend paying whole life insurance as the vehicle, you are the driver.  In addition to many other benefits, some of which are discussed above, you will also have a guaranteed lifetime death benefit.  When designed correctly, the tax-free payout of this insurance continues to grow each year.  You get guaranteed lifelong protection that will be there when your family needs it most, and you have created an instant, growing, and permanent legacy for all future generations.  The benefit provides a guaranteed tax-free income for your beneficiaries (transfer of wealth) and/or a guaranteed estate planning tool to pay estate taxes from the sale of other assets (deemed dispositions upon death).  The keywords are: guaranteed, lifelong, growth, legacy, and tax-free.  Believe it or not, the wealthy have been using this concept for hundreds of years – to transfer wealth tax-free to the next generation.  Why only them – because they were educated about it.  Now you can be too!