# data[].attributes.headline
Website #1: What is an emergency fund and how to build one?

# data[].attributes.subject
Website #1: What is an emergency fund and how to build one?

# data[].attributes.body
This website talks about what an emergency fund is and it offers examples of what is and what is not considered an emergency fund. It talks about how the whole purpose of having this fund is to prevent using retirement savings, loans or credit cards which tend to have high interests on them. Also, it stresses the importance of having this fund regardless of your financial status or what your yearly income is because emergency expenses are inevitable. The amount that you save in your emergency fund depends on your expenses, if you would be receiving employment insurance if you lose your job or if you are self-employed. Then, it offers three simple ways of creating this fund. First, make a budget in order to identify your expenses and figure out how much you need to save. Second, choose a savings account that you can store the emergency fund. Apparently, tax free savings account is recommended for storing your emergency fund. Third, as soon as you get paid, you must put a predetermined amount in the savings account. This prevents you from spending it on something else.

I choose this website due to the simple tips it offers to create your emergency fund, which makes it applicable to everyone. One aspect of this website I found interesting is that a tax free savings account is the best account to store your emergency fund because of the flexibility it offers and you are able to withdraw tax-free from the account. This website is different from the others because it offers a more in depth explanations of which savings account are recommended for your emergency fund.

# data[].attributes.attachment_link.readable_text
An emergency fund is a financial safety net designed to cover unexpected but necessary expenses, or bridge the temporary loss of income between jobs. This guide breaks down the tools and strategies you can use to build one.

An emergency fund is a financial safety net designed to cover unexpected but necessary expenses, or bridge the temporary loss of income between jobs. This guide breaks down the tools and strategies you can use to build one.

Table of contents

We all know we need an emergency fund-but what exactly is it, and how do you build one? We'll take a detailed look at what "emergency" means; why we all need to put away funds in case of an emergency; how to use the "Pay Yourself First" method of saving; how much we each need to save; and the best high-interest savings accounts to stash and grow our money.

What is an emergency fund?

An emergency fund is a sum of money saved to cover major unexpected expenses such as:

Urgent major repairs (not renovations) to your home or car

Unexpected medical expenses not covered by universal health care or insurance

Lack of income due to job loss

This fund is different from a regular savings account for everyday expenses or future planned purchases. An emergency fund is a financial safety net designed to cover expenses or bridge the temporary loss of income between jobs. It's also there to prevent the use of your retirement savings, or high-interest debt, such as credit cards and payday loans.

According to the Government of Canada , 64% of Canadians have an emergency fund to cover three months' worth of expenses, so most of us are on the right track.

Why do I need an emergency fund?

Just like the name implies, an emergency fund is meant for emergencies. Unexpected events happen in life: The car breaks down, the fridge stops working or you get laid off during a recession. Without an emergency fund to help cover your expenses, you could end up paying bills with a credit card, relying on payday loans or heavily using your secured or unsecured line of credit.

All these options charge interest, but the credit-card and payday-loan rates are very high. Canadians pay an average of 19.99% on credit cards. They pay even more on a payday loan, which has an annual interest rate of 442% , according to the Government of Canada.

While these services offer access to money, you'll have to pay them back right away to avoid interest charges, which quickly begin to add up. Making required payments may leave you short of money until your next pay, and you may end up needing to use a credit card or take out another payday loan to fill the gaps. This creates a cycle of debt which can be very hard to break.

A line of credit might look like a better option because the interest rate is significantly lower than a credit card or a payday loan, but there are some things to know before you borrow money this way.

A secured line of credit is usually tied to an asset-such as your home, in the case of a Home Equity Line of Credit. A HELOC is intended to help finance home improvements and can be used for financial emergencies once it's paid off.

An unsecured line of credit isn't tied to an asset for collateral, so the interest rate is higher than a secured line of credit.

The issue is, lines of credit aren't actually "savings." Sure, you can take out money, but you have to pay it back with interest. It may take a long time to settle the debt, depending on how much you borrow. And, it can hurt your credit score if you default on any payments. That can prevent you from making future big purchases and stop you from getting additional loans at a good interest rate. And there's the stress of having to pay back what you owe.

While using a line of credit for emergencies is an option if you don't have an emergency fund, it's better to use your savings before tapping a line of credit.

How much should I keep in an emergency fund?

The traditional advice was to save three to six months of expenses in an emergency fund. The old rule of thumb doesn't apply anymore because most Canadians struggle with debt, carrying an average of $72,500 , according to Equifax Canada. That three to six months' worth of expenses would go entirely towards debt repayment.
So, what can you do?
While aiming to save that ideal nest egg of three to six months worth of fixed expenses is always the plan, just try to save as much as you can within your budget, factoring in debt repayment.

If you've had your current job for several years, you may be fine with three months' worth of expenses. If you lose your job, you may receive a severance payment from your employer, and likely qualify for Employment Insurance (EI).

However, if you're self-employed, a contractor, work on commission or are a gig worker, six months is a safer estimate, as you may not qualify for EI to help you cover necessary expenses while you search for more paid work.

What qualifies as an emergency?

An emergency is any unexpected, necessary expense. It is not something that recurs or is part of everyday life. Emergencies include:

Medical, dental or veterinary emergencies

Car emergencies, like accidents, repairs or insurance deductibles

Home repairs, like furnace replacement, basement floods or the breakdown of a major appliance

Unexpected job loss

Acts of nature resulting in property damage or loss

Advisors suggest asking yourself these three questions:

Is this event unexpected?

Is it necessary?

Is it urgent?

The more you answer "yes" to any of these questions, the more you need to access your emergency funds.

What doesn't qualify as an emergency?

Several situations might feel like an emergency but may not be. These include:

Property tax payments

Vacation (it just feels like a necessity)

A baby

A new pet

A new car

Weddings

Annual car expenses, like license renewals

Buying investments

A down payment on a new home

A good sale at your favourite store

Ask yourself if the situation is unexpected, necessary and urgent. With these situations, you should not use your emergency fund. If you need to set further limits to avoid using your emergency fund, make sure it isn't connected to your debit card. That way you won't be tempted to do spontaneous spending.

How to build an emergency fund

Saving for an emergency fund is different from investing or planning for retirement. When you invest, your money is tied up in stocks, mutual funds or exchange-traded funds (ETF) and isn't liquid. Investing is a way to increase your wealth and is part of a long-term plan.

Saving for an emergency fund isn't about long-term goals, increasing your wealth or planning for retirement. It's about having immediate access to cash.

So, how do you start an emergency fund?

Create and analyze your monthly budget to see what you can afford to put aside in savings

Set aside a certain amount each month or each paycheque

Set up either a Tax-Free Savings Account (TFSA) or High-Interest Savings Account (HISA)

Disconnect it from your debit card so you won't spend it

Pay yourself first

Automate those payments

1. Set a monthly budget and find out what you can set aside each month

Choose your budget tracker of choice. It could be Excel, an online tool or an app of choice

Collect receipts, bills and pay stubs for the past six months. Some expenses will be the same amount each month (mortgage, rent, credit cards), while others might change depending on usage (hydro, entertainment, food, transport)

Enter those numbers into the budget (if numbers differ monthly, use the average)

Be as accurate as you can-look at the information you've added and adjust, add or subtract as needed

Review your budget to see if there are any categories where you can spend less (some budget apps offer suggestions where you can cut back)

Some experts suggest saving 10% of your salary, but if that's difficult, start by saving what you can, even if that's $10 to $20 a month. TFSA savings accounts and high-interest savings accounts offer a higher interest rate than traditional savings accounts, so your money can compound at a higher rate over the same period of time.

If you have debt, you'll want to pay that off as quickly as possible because the debt's interest rate is higher than the earn rate on your emergency fund. That way, once you've paid off the higher-interest debt, you can redirect that money towards your emergency fund, which should feel pretty easy to do, because you've already developed the habit of saving money.

2. Choose the right savings account for an emergency fund

Where should you put your emergency fund? There are two ideal options: inside a TFSA, or a regular high-interest savings account.
Tax-Free Savings Account
A TFSA is a registered investment or savings account that allows you to invest in a number of different instruments, including ETFs, stocks, bonds and cash, for tax-free gains. The amount of money you can deposit is limited to $6,000 per year, to a lifetime maximum total contribution amount of $69,500 as of 2020. Any amount you don't use in a given year remains available to you going forward, so it isn't a "use it this year or lose it" situation.

TFSAs are very flexible and are the best option for an emergency fund because you can use them for any short- and long-term savings goals, and you can make tax-free withdrawals. (RRSPs, on the other hand, require you to claim any withdrawals as income.) TFSA savings accounts can also offer a higher interest rate than the average savings account, currently around 2.0%.
Compare the Best TFSA Savings Accounts in Canada High-interest savings account

High-interest savings accounts are just what you'd expect. They pay higher interest than standard savings accounts, which makes them a good option to deposit your emergency fund. Most of them offer an average of 2.0%, up to a certain balance amount. And most banks and credit unions offer their own version of a HISA.

Take the time to compare different options when looking at HISAs, because some will charge transaction fees. But there are several options that are no-fee and don't require a minimum balance.
Compare the Best Savings Accounts in Canada
3. Pay yourself first

Personal finance advisors are fans of the "pay yourself first" savings technique because it's a secure way of building up savings.

It's pretty simple: You put your savings goals first, so as soon as you get paid, you immediately put a predetermined amount of money into your savings account of choice. The best way to follow this method is to automate the transaction. That way you don't see the money coming out of the account where your paycheque is deposited, but you will see your emergency fund grow.
Compare the Best Savings Accounts in Canada
Related Articles

# data[].attributes.attachment_link.title
What is an emergency fund and how to build one | MoneySense

# data[].attributes.attachment_link.description
An emergency fund is a financial safety net designed to cover unexpected but necessary expenses, or bridge the temporary loss of income between jobs. This guide breaks down the tools and strategies you can use to build one. An emergency fund is a financial safety net designed to cover unexpected but necessary expenses, or bridge the temporary loss of income between jobs.

# data[].attributes.headline
Here we will be exploring the importance of having a financial "safety net" and how saving and budgeting are necessary components of the plan. The financial "safety net" is more commonly referred to as an "emergency fund", which is used for life's unexpected expenses and can offer you financial security during those times. This topic is quite relevant as we are going through a pandemic, where people were faced with financial and job losses. 

# data[].attributes.subject
Here we will be exploring the importance of having a financial "safety net" and how saving and budgeting are necessary components of the plan. The financial "safety net" is more commonly referred to as an "emergency fund", which is used for life's unexpected expenses and can offer you financial security during those times. This topic is quite relevant as we are going through a pandemic, where people were faced with financial and job losses. 

# data[].attributes.headline
Website #2: 3 ways to save money in difficult times

# data[].attributes.subject
Website #2: 3 ways to save money in difficult times

# data[].attributes.body
This website focuses on easy tips to be able to save money during times of difficulties. Specifically, it focuses on how to increase your emergency fund when you are on a tight budget. The first tip is always putting aside an amount from your pay cheque into your savings account. Even though this tip is frequently seen across many sites. In this site specifically, it encourages to put as much as they can and that it does not have to be a predetermined amount. Second, place your emergency fund in a high interest savings account because unlike in stocks, this money is insured up to $100,000, which makes your money secured. Third, is to budget more and spend less. This means following a 50/30/20 rule which involves 50% of your money goes to your personal needs, 30% goes to fun things and then 20% should go to your savings. And, one final tip it offers to not be focused on the amount that is placed in the savings but you should be focusing on the fact you are making regular contributions.

The reason why I choose this website is because you can compare the different Bank of Montreal savings accounts that is offered, which allows you to put your plans into action. One interesting fact from this website is that the point of budgeting is not about spending less but rather being aware of how much you are spending and where your spending is going. Many times people view budgeting as a means to having to spend less. This website is different from other websites because you can get real details about savings account or make an appointment with a financial advisor to talk about making an emergency fund.

# data[].attributes.attachment_link.title
3 Ways to Save Money in Difficult Times - BMO

# data[].attributes.attachment_link.description
Having trouble saving money during tough times? Don't worry - here are 3 helpful tips plus find out how savings accounts can help you.

# data[].attributes.headline
Video #1: Canadians' Foolish Spending Ways

# data[].attributes.subject
Video #1: Canadians' Foolish Spending Ways

# data[].attributes.body
This video looks at the spending and saving habits of Canadians. In the 1980s, for every dollar that was earned, people would put away 20 cents. During these times, interest and mortgage rates were very high, which means more people would save. Nowadays, people have abandoned saving money and avoiding debt. Currently, less than 5% of income goes to saving and more people are getting high amounts of mortgage because they are able to do so. Overall, consumer debts have increased, which includes lines of credit and credit cards. Reports have shown that if the bills went up by a small amount, a good portion of Canadians would not be able to afford them. This is quite dangerous if these individuals may lose their jobs or emergency expenses arise. Many times these low interest rates influences people to not save and the mentality of saving is viewed as old fashion. However, it is our duty to educate ourselves on budgeting and saving because those things makes us financially smart.

The reason why I choose this video is because it gives a little bit of a preview on what is going on with Canadians in terms of spending and saving. The Canadian financial circumstances is quite shocking and lots of people are not doing so well. One aspect of the video that I found interesting was that sometimes credit cards that offer low interest rates has a negative influence. In other words, since it is a low interest on a credit card, it is less of an incentive to save. This video was different from other videos because it looked at what was happening in the general Canadian public.

# data[].attributes.attachment_link.title
Canadians' Foolish Spending Ways | ViewPoints

# data[].attributes.headline
Video # 2: Emergency Funds - Everything You Need to Know

# data[].attributes.subject
Video # 2: Emergency Funds - Everything You Need to Know

# data[].attributes.body
This video talks about the basics that you need to know about an emergency fund. An emergency fund is cash that is ready to use for unexpected life expenses like your car breaks down, you lose your job, home repairs, dental/medical, sick pet, if you become sick or emergency trips for funerals or visiting a loved one who is sick. The benefit of having an emergency fund is not getting yourself into unnecessary debt, having a piece of mind and you are more financially flexible. A general minimum rule is to have about $2000 saved up. But, a better idea is to have 3-6 months’ worth of money for living expenses. In order to get this started, you need to take a look at your budget which includes your wants, needs and savings. Depending on the circumstances, you may need to take out your wants completely. To get the amount saved, first sell any items that you no longer need and second, having a no spend challenge which means removing all wants and put that money into your emergency fund. In order to get more money into your emergency fund, you can also have a side hustle or get an extra job, without spending more. Also, make sure you do not put your emergency fund in investment.

I really liked this video because it explained the importance of having an emergency fund in a really simple manner. Also, it offered many great tips on how to get started on build your emergency fund. One aspect of the video that I found interesting was that you should never put your emergency fund in an investment because during certain situations like the lockdown, the stock market crashes. This means that the money you invested can drop and you are losing out on the money, which is not ideal during emergency situations. This video was easy to understand in comparison to many videos out there, which is a lot more effective in teaching an audience.

# data[].attributes.attachment_link.title
Emergency Funds - Everything You Need To Know | Canada 2022

# data[].attributes.body
This website is more of a module on budgeting, meaning it offers great detail about budgeting. A huge component of creating an emergency fund has to do with having an effective budget. It stresses the importance of how budgeting can allow you to have control over your finances. Many times making more money does not mean that you are financially smart. There are four steps in the budgeting cycle including prepare, create, implement and then review. This website also allows you to download the budget template to input your personal details. In terms of prepare, it is estimating how much money you will receive, pay and save. Once you get all your estimates, then you can create your balanced budget. Once that is completed, you can put it in action in the real world. Finally, you want to review and adjust your budget if necessary. This website offers for each step, lots of details, step by step instructions and things to take into consideration.

I choose this website because the in depth information that it goes into because as we know budgeting is crucial to make an emergency fund and be financially secure. One interesting factor from this website is reviewing your budget and making changes if needed. This is a step that is many times overlooked but is very important if you want to create a good and effective budget. This website is different from other website because of the amount of detail it offers and instructions that is offered for budgeting.

# data[].attributes.attachment_link.readable_text
In this module:

When completing the modules:

take your time, move at your own pace and take regular breaks;

sit in a quiet place; and,

write down any questions you may have and bring them with you to your in person counselling session.

Although the modules are presented in a certain order, it is important to remember that everyone is different, so your BIA Insolvency Counsellor can adjust your counselling to suit your needs. This may include changing the order of the online modules.

Budgeting overview

The insolvency counselling process

Proactive decisions involve taking control and acting in advance, rather than reacting.

Budgeting is the first step to your fresh financial start.

Budgeting allows you to make proactive decisions about your money and puts you in control of your finances.

Budgeting allows you to make deliberate decisions about your money and ensure your financial stability.

Deliberate decisions involve taking your time to carefully think about your choices.

Budgeting will help ensure that you have enough money for essentials, as well as the things that are important to you.

Budgeting is a process which will empower you!

The objective of the budgeting module is to provide you with the right information and tools to create and maintain a budget. By the end of this module, you will have developed your own budget. You will bring this budget to your in-person counselling session. During your in-person counselling you and your counsellor will work together to make sure your budget will help you be successful in the future.

This module will provide you with tips to make budgeting a comfortable part of your routine.

If you have questions, write them down and bring them to your in-person counselling session.

top of page

# data[].attributes.attachment_link.authors[].name
Office of the Superintendent of Bankruptcy

# data[].attributes.attachment_link.description
In this module: When completing the modules: take your time, move at your own pace and take regular breaks; sit in a quiet place; and, write down any questions you may have and bring them with you to your in person counselling session.

# data[].attributes.body
This video talks about a rainy day fund versus an emergency fund. It is shown that statistically, 49% of Canadians are not prepared for emergency expenses. A true emergency is something that is unpredictable and cannot be planned including a flood disaster causes you to redo your entire basement. Therefore, the funding is a larger but more general amount of money. While, rainy day funds are emergencies that are predictable, including if you have a car eventually something will break. Calculating savings amount is divided into two categories; when you lose your job or during the rainy days. For the rainy day fund, one must make a list of all the things that may need to be repaired or changed. Once, you calculate your amount that you need, then the saving must begin. This means the saving amount you need has to be placed in your budgeting plan.

I choose this video because it offered many relatable examples and it was easy to follow and understand. One aspect of this video that I found interesting was differentiating between rainy days versus an emergency fund. I honestly thought it was the same thing, but it seems like there is a difference. And, this difference should be incorporated in our savings. This video was a little different from other videos because it took an approach on saving based on rainy days versus emergency.

# data[].attributes.attachment_link.title
What is a Rainy Day Fund: Saving for Emergencies

# data[].attributes.headline
Website #4: Protecting Your Financial Well-Being

# data[].attributes.subject
Website #4: Protecting Your Financial Well-Being

# data[].attributes.body
This website is another module, but this time on minimizing financial risks in order to protect your financial well-being. First, it is important to choose an insurance that best suits your needs, this includes for home, auto, life, health, disability and even travel insurance. Second, you must have an emergency fund because in life unexpected situations always arise. An alternative to creating an emergency fund is to start a small emergency non-perishable food fund. If an emergency hits, you can use the regular food budget to help with the emergency expenses while still being able to feed yourself. Third, making saving a habit can offer you more control over your expenses. When making financial goals, you need to make sure they are SMART goals, which means they are specific, measurable, achievable, relevant and time- bound. Finally, it is important to create your budget with your financial goals in mind.

The reason why I choose this website is it offers a lot of detail step by step, in order to make the most of having financial goals and a budget. One interesting factor of this website is the alternative emergency fund because there are different methods of preparing an emergency fund other than just saving money. This website is different from other sites because it goes into the importance of creating SMART financial goals and incorporate that into your budget, which is a big component of creating an emergency fund.

# data[].attributes.attachment_link.readable_text
Financial risk management

It is impossible to eliminate all of your financial risk; however, there are strategies that can be used to avoid and minimize risk, and even help protect yourself from it. These are outlined below.

Selective insurance coverage

There are many kinds of insurance, from life, health and disability insurance to home, auto and even travel insurance. In choosing your coverage, it is important to recognize what insurance types constitute a need, and which could be characterized as a want, as well as the extent of coverage needed. A professional insurance representative can help you in this, but be wary of unnecessary fees.

Be sure to compare prices to make sure you are paying a fair rate. Before buying insurance, look at all of the protection you currently have, either privately or through your employer. Keep in mind that some types of insurance are very expensive and may not be necessary for your specific needs.

Emergency savings

One of the best financial risk management strategies is an emergency savings fund. This type of fund puts you in control. It can also help protect your financial stability and ensure your financial security.

An emergency savings fund is a part of your income that you set aside in case of a financial problem. Emergency savings can prevent you from having to borrow money to pay for an unexpected event.

Here's how you can setup your emergency savings fund:

Use the "emergency fund" section of your budgeting template for emergency savings

Keep the money in a separate savings account and ask your bank to automatically transfer a small amount of your monthly income to your emergency fund (savings account) each month

Don't spend your emergency fund on non-emergency expenses

Other types of emergency savings

Many people do not have the ability to set aside some of their monthly income for emergencies. An alternative to having emergency cash savings would be to start a small emergency non-perishable food fund. Every time you shop for groceries, consider buying just a few non-perishables to store in a special place for emergencies. When an emergency hits, you can use the regular food budget to handle it and you will be able to feed yourself using your emergency food supply.

Saving

Saving puts you in control!

If possible, you can start saving on a regular basis to prepare for emergencies and save for large expenses. Many financial goals rely on savings, which gives you the ability to make choices rather than going from one spending emergency to another.

Why saving is important:

Helps you manage financial risks and gives you security (as you learned above)

Helps you achieve important goals without having to borrow money

Gives you choices and more financial freedom

Strategies for saving

One strategy for saving is to "pay yourself first". This is an effective strategy to make sure you reach your savings target every month. It reduces the temptation to skip a contribution and spend the money on something else.

This strategy involves automatically directing your specified savings from your paycheque. You can do this by speaking with your payroll administrator. Your paycheque can be split into two parts, or your bank can make an automatic transfer.

The money is then automatically taken from your paycheque and put into your savings account. This allows you to pay yourself before paying your monthly living expenses and making unnecessary purchases. This approach works best when your paycheques are consistent.

# data[].attributes.attachment_link.authors[].name
Office of the Superintendent of Bankruptcy

# data[].attributes.attachment_link.description
It is impossible to eliminate all of your financial risk; however, there are strategies that can be used to avoid and minimize risk, and even help protect yourself from it. These are outlined below. There are many kinds of insurance, from life, health and disability insurance to home, auto and even travel insurance.

# data[].attributes.headline
Image #1: Canadian Statistics 2019 on Emergency Funds

# data[].attributes.subject
Image #1: Canadian Statistics 2019 on Emergency Funds

# data[].attributes.body
This graph from the Government of Canada website looks at the percentages of Canadians who have an emergency fund sufficient to cover 3 months of expenses or up to $2000. According to the Canadians statistics image, 61% of budgeters are able to come up with this emergency fund. And, 46% of budgeters feel like it is too much to come up these savings amount. Overall, this indicates that those who budget are more capable of having an emergency fund in comparison to those who do no budget.

# data[].attributes.body
This graph from the Government of Canada 2019 website depicts debt repayment by three methods. There were three groups; no budget because it was not needed, no budget because it was overwhelming and those that used a budget. Those that used a budget were more likely to pay off their debt quicker. This can be due to a variety of reasons including they have good planning techniques to pay off debt or those that budget only use credit cards for purchases that they know they can afford. This is a key finding because budgeting is an important aspect of an emergency fund. Overall, this picture brings a new perspective of the importance of budgeting.

# data[].attributes.headline
Video #4: 34% of Canadians are worried about paying their bills

# data[].attributes.subject
Video #4: 34% of Canadians are worried about paying their bills

# data[].attributes.body
This video talks about the financial statistics of Canadians during the pandemic. According to the video, one third of Canadians were worried about paying their bills. Also, a good portion of Canadians were fearful of losing their job. In Canada, two thirds of the economy are dependent on people spending money. However, if individuals are fearful of not being able to pay their bills or losing their jobs, then they will not be spending as much. And, the economy will definitely go down as a result of it.

I choose this video because it talks about the Canadian financial perspective as a result of the pandemic and the situation that was going on in earlier this year in March. It also showcases the importance of having an emergency fund because in situations like the pandemic where many people lost their jobs, it would have been quite handy. One thing that I found interesting in this video was that more Canadian youth were afraid of losing their jobs or being able to pay their bills. Perhaps, that can be indicative of the lack of emergency funds that the Canadian youth have saved up. This video is different from other videos because it is relevant to what is happening in Canada with the pandemic and the lockdown.

# data[].attributes.attachment_link.title
34% of Canadians worry about paying bills: Statistics Canada