Emergency Savings?? No Thanks! (Canada)

Because we hear the word loan and we go, oh, that's bad, Vern. Why would I ever use a loan or borrow money from anyone ever if I have cash right here in my hand to solve the problem?

Emergency savings? No, thanks, Vern. I don't have emergency savings in the traditional sense anymore. And I understand neither do you. How is it that we manage in the case of things going wrong, because they inevitably will. That's what we're going to talk about today. So, for me, I talk. I work with a lot of real estate investors, and I think, you know, most people would be aware of a contingency fund. You may have a fund yourself that you're putting aside for rental vacancies or repairs on the property. What changed for me when I implemented the process of the infinite banking concept was that that emergency fund now sits inside my policy, so no longer is that money doing nothing. So I used to be frustrated that I had this money that was sitting there, that doing nothing for myself or for growing wealth. And so now that money can sit there, I can access it. I haven't lost the liquidity of that money. But in the meantime, my money continues to grow and compound.

Yeah, I mean, there's such so many good points there. I mean, whether you're a real estate investor or if you're just a family trying to get ahead, you know, we're always hearing about, hey, you should have some kind of a savings or a contingency or an emergency fund, right? But to your point, you know, real estate investors in particular, or people who just invest, they understand that it's really important to keep your money in motion all the time, Right? Because how else do I grow it?

If I.

If the money's sitting still, it isn't doing anything. But they also recognize, well, I need to be a responsible investor. Look, if I've got properties or if I got things that I'm responsible for, again, if your water heater goes or you have management fees or, God forbid, you have a vacancy, you need to have capital set aside so that you can deal with those financing issues, right? But they're putting that money usually in someone else's bank and in the commercial banking system, and the money just sits there and does nothing. Well, let's take the investor out of it for a second. Well, if you're a family, if you have, you know, you have expenses that you have to match every month, you have, maybe you have payments, you have a mortgage, you have property taxes, maybe you like to pay your insurance premiums and different things, on an annual basis. Well, if that's you, you're piling up money, you're saving it, and you're storing it in someone else's bank and it just sits there. But that's not what you and I are talking about, is it, Liz? We have an alternative way that can help you keep your money growing while maintain access to the money. Is that right, Liz?

That's right. And it's storing it in a dividend paying whole life insurance contract so that your money continues to grow. And you also have the ability to use the insurance company's money when you need liquidity to go and meet those emergencies or the objectives that Vern talked about. So works really, really well for families, especially, you know, annual expenses. Even as Vern described that you're saving up for, you can then still go and use that money when you need it to pay off those annual expenses and then pay money back your system. So your money's continuing to grow while you're still meeting your objectives and you're not changing your cash flow. What you're changing is the way that you're getting the benefit and the ongoing growth of that money.

This is a conversation that I literally have with my clients because I can't remember if you mentioned the word policy loan or not. What we're doing is we're storing money into our banking system, our permanent participating whole life policy contract. And that contract has some guarantees that the insurance company is on the hook to fulfill upon. And one of those guarantees simply says the total cash value in the policy must rise every single day such that it matches the total death benefit. So over time, my death benefit's actually growing just by virtue of how we structure the policy. So my death benefit's growing. Well, my cash flow is always chasing that death benefit. So there's always more and more cash every single day in the policy than there was the day before. Now, my clients are trying to wrap their mind around this policy loan thing, because we hear the word loan and we go, oh, that's bad, Vern. Why would I ever use a loan or borrow money from anyone ever if I have cash right here in my hand to solve the problem? Let's just say I had $1000 today and I had $1000 problem. So I have $1000 over here in this pot called a commercial bank account, a savings account of some sort. And over here I have $1000 of policy loan availability. So on column A, or let's say twin brother number one, goes and accesses the thousand dollars and he solves the problem. Well, now, Liz, who has twin number one, who has twin number one's money.

Whoever he gave the money to. And his bank balance is zero.

Yeah. Someone else has the money and now it's being put to work over there. He's permanently transferred that financial energy away from the family. And then when he wakes up tomorrow and he looks at his bank balance, Liz, what's it going to say?

Zero.

Going to say zero. Okay. So that's a part of the problem is we're working real hard, we're getting money, and then we're permanently transferring that money away. And now we got to get back on that hamster wheel and go to work again to get more money every single day. Twin brother number two, who discovered this book, and he worked with a really good infinite banking coach, and he learned about the process of becoming your own banker. He sees that he's capitalized his policy and now he has a loan availability within his policy system of $1,000 to save that or to solve that same problem. Now he accesses that $1,000 via something called a policy loan, where, Liz, he's not withdrawing the money out of his policy system, is he?

No. He's using the insurance company's money.

Yeah. So what he's doing is he's borrowing against his policy cash value and they're putting a lien against the death benefit. So God forbid, if he ever gets taken out by a bus or something like that, what'll happen is the insurance company will pay out the death benefit and wipe out the policy loan outstanding, any interest that accumulated or what have you, and then the rest of the balance of the death benefit will. Will flow to the beneficiaries tax free. So now brother number two is able to access that, the insurance company's money via a policy loan. And when we say he's accessing the insurance company's money, Liz, it's because his money never leaves the pool. It continues to grow every single day. And he borrows against that money. He goes and solves the problem. But now what's happening to the cash every day?

Still growing.

It's still growing. So whether he pays back that loan or not, now when I say whether he pays it back or not, Liz and I are not encouraging you not to pay back that loan. Because if I access a loan to pay, let's say my home and auto insurance for the year, I need to start saving again for next year's home and auto insurance, don't I? Well, I could save that in someone else's bank or I could save it in my own policy back against the policy loan. And so now my cash is growing every day, Liz. So when I, let's say I drain or I pull out the maximum policy loan that I can Access today, that's $1,000, what's going to happen when I wake up tomorrow? When I look at my cash values or my loan availability, there will be.

Some money available because your money is still inside working and compounding for you.

Exactly. So I mentioned the word interest. If you and I are in business, Liz, and we have $1,000 in our business and I need access to some money. If I borrowed money from our business, are you going to let me borrow that money from our business for free?

Absolutely not then.

Because if I borrowed out of the business, it's no longer working in the business to grow the pool in the business. Right. So I need to pay that money back with interest. Just like if I borrowed it from someone else's bank, I'm going to pay them back with interest. Well, if I can pay my own policy system back with interest and my cash value is growing every day anyway, I can go back and pay back the principal, pay back the interest and re access everything I pay back, including the growth. Liz, do I really spend a lot of time worrying about or focusing on the interest rate? Do I really care about the interest at all?

Not at all. Especially as your growth continues to be significant and you're not interrupting that compounding. So you're continuing to get the benefit of that money. Whereas twin A was losing money and having to work harder and effectively having to make payments back into somebody else's system. So either way, both twins are making payments. It's just where is that money flowing to? Is it flowing back into somebody else's system or is it flowing back into a system where you're getting the ongoing benefit of it?

Yeah. So twin A or twin number one has the banking process working against them. Twin B, twin number two has the banking process working for them. That's all we're talking about here. It's as simple as that.

We're not saying don't have an emergency fund, we're just saying have an emergency fund in a really effective place where you can continue to get the benefit and you can store money without giving up the liquidity of that.