Infinite Banking in Canada - Is it Right For You? Who Should and Who Shouldn't Do It?
Today’s blog is all about the Infinite Banking Concept, family banking, private family banking, bank on yourself, it goes by many titles depending on who you hear it from.
Who is this good for and who is it not good for?
There's kind of two big categories of people that should do this, one is if you're doing this personally, so usually it's for your family and the other is if you're doing it corporately, so you've got an incorporated business and you're doing it inside your company.
Watch this as a video in 5:26 mins
Who should do this?
This is a great strategy for people who have financial stability in their lives and can commit to a long-term savings plan and this means long-term savings plan of a minimum about a thousand bucks a month for at least the next 10 years. This cannot be a problem for you if you want to do this strategy.
Who should not do Infinite Banking - if that sounds scary to you and sounds like something that's not something you want to sign up for. Then you shouldn't sign up for it.
This is a great strategy for business owners that keep retained earnings in their company every year and even more ideally, if you keep the retained earnings and you push them up to your holding company.
You want to have a holding company and then what that does is it allows you to keep the cash in the company, it allows you to earn a return on those funds while not being subjected to high taxes and especially here in Canada.
In Canada, we've got these new passive income rules and this doesn't get affected by those passive income rules, it allows you to keep liquidity too.
As a business owner you don't want to tie up your cash, you need cash for well you know we just had a pandemic, a lot of business owners needed cash to get through that. It also allows you to build a retirement plan inside your company and eventually if you want to pass this down to your kids or to a charity of your choice, this is one of the most tax efficient ways and fastest ways to do it
So the business owner really should have consistency of revenues and consistency of profit and a reasonable expectation that they're going to be saving high retained earnings into their company every year and this especially works really well for people who have really high margin businesses and not a huge ability to go out and get more expenses.
So that's really who should be doing Infinite Banking in Canada.
Whether you're doing it personally or in your company that's what kind of your basic wants to be person.
Who should absolutely stay away from this strategy
Just because you're staying away from it now doesn't mean that this might not work for you in the future, but this is absolutely not a good strategy for someone who's not in a good financial situation or someone who's got lots of debt or somebody who doesn't have good savings habits.
Here on the internet you know everybody's always telling you that this is like the greatest thing ever and that everybody should do this but really you shouldn't if you're not in a good financial situation.
Some people really shouldn't do this strategy until they sort out a lot of other negative financial factors in their lives.
For just a basic easy number to go with if you're an adult and you can't commit to saving at least a thousand bucks a month for every month for the next 10 years this is not a strategy you should do and most of our clients are saving way more than that right now.
We have people doing fifty thousand, a hundred thousand, two hundred fifty thousand, even five hundred thousand dollars a year those are the kind of numbers that you really want to make this work for you.
If you've got kids lower numbers work great, you can work with much much lower numbers like save a hundred a month, two hundred dollars a month or five hundred dollars a month.
And then there’s usually what we're doing is we're setting them up for 20 years because we're usually setting it up for kids right when they're born and we're setting it up so that the parents stop paying when the kids are around 20 years old but we've got tons of flexibility.
To recap, the Infinite Banking Concept is good for Canadians with a family who can commit to saving at least $1,000 per month for the next 10 years & for business owners who have a holding company who are consistently saving retained earnings inside their company.
This is not a good strategy for people who are in a bad financial situation and don't have strong, consistent cash flow and a well-developed savings habit.
Next Steps:
We've helped 100s of Canadian families and business owners set up the Infinite Banking Concept for more than a decade. We are official Authorized IBC Practitioners with the Nelson Nash Institute click to verify here.
To discuss if this financial concept can be right for you, schedule a no pressure Discovery call with our advisors. We will let you know if this concept is a good idea for you or not. We have no pushy salespeople on our staff.
Related Insights
OpCo to Legacy: The Estate Tax Trap
If your business owner client passed away tomorrow, what would happen—from a tax perspective—and what have you done as their advisor to plan for it?...
How Critical Illness Insurance works in Canada
What would happen if you were diagnosed with cancer tomorrow? How would you cover your mortgage, your bills, or your business expenses while you focused...
How Disability Insurance Works in Canada
What would happen if you suddenly couldn't work—due to an accident or serious illness? Understanding How Disability Insurance Works in Canada can help you prepare...
Critical Steps to Safeguard Your Legacy With Estate Planning
What happens to everything you've worked so hard to build—your business, your investments, your family home—after you're gone? It's important to understand the critical steps...
How to Be Like Jim Pattison
What if you could borrow the exact wealth-building strategy used by one of Canada's richest entrepreneurs—without being a billionaire? If you've ever wondered how to...
How to Invest in your Holding Company In Canada
Are you a Canadian business owner with retained earnings building up inside your corporation? If those funds aren't being put to work through a holding...
How do Capital Gains Work in Canada
How Do Capital Gains Work in Canada? A Guide for Business Owners and High-Income Professionals. Capital gains tax in Canada can take a serious bite...
How Life Insurance Works in Canada
Most Canadians believe life insurance is simply a backup plan. It is something you purchase in case the worst happens so your family is protected....
The Canadian Business Owner’s Guide to Wealth Management
You’ve built a successful business. Your corporation is generating profits. Retained earnings are accumulating. On paper, everything looks strong. Now is the perfect time to...
How to Use Whole Life Insurance as Collateral for Tax-Free Loans in Canada
What if you could access capital for your business, investments, or retirement — without selling assets, triggering capital gains, or paying tax on withdrawals? You...
How Canadian Business Owners Can Stop Losing Money to Taxes
How Canadian Business Owners Can Reduce Taxes Using RRSPs & TFSAs Are you a successful Canadian business owner, real estate investor, or incorporated professional? If...
The Core Principles of the Infinite Banking Concept (IBC): A Canadian Perspective
Managing your finances in today’s world means more than just saving money—it’s about creating a system that gives you control over your wealth, both now...
