Here’s how a dedicated emergency fund can help you when you need it the most

Raw Text

Skip to main Content

here

Read other stories

"Artists will always make it work"

From advertising to barbering to mental health care

4 helpful tips to start saving for your financial goals

Rediscover season 2

Rediscover season 1

Young workers | Desjardins

Financial Services for Post-Secondary Students | Desjardins

Saving for the long term is an essential part of reaching your money goals, but what happens when an unexpected expense pops up? Emergencies, from minor costs like car repairs and vet bills to larger ones like job loss or illness, can potentially hinder your financial progress.

In these cases, having a dedicated emergency fund can bridge the gap between cash coming into your account and money that needs to come out.

Why you should think about having an emergency fund

You may not think you need an emergency fund, especially if you have easy access to credit, but emergencies can come in many different forms. For example, you may be able to use credit to cover a small emergency like car repairs, but a bigger crisis, like losing your job, could present a real financial problem over a longer time. Covering bigger emergencies with credit is possible, but it could set you back financially. Emergency funds can prevent that.

The right amount to save for emergencies

When deciding how much money to save for emergencies, start by looking at your fixed expenses. Fixed expenses are costs that don’t change monthly, like rent and debt payments. Your emergency fund should cover three to six months of your fixed expenses. For example, if your fixed expenses amount to $1,000 per month, your emergency fund should hold $3,000 to $6,000.

If that amount seems too daunting, focus on saving a smaller sum, like $1,500, and work your way up from there.

How to build your emergency fund

The easiest way to reach an important savings goal is to automate it, and emergency funds are no exception. You can set it and forget it by setting up pre-authorized transfers. Then, a set amount of money will be withdrawn every payday from your account and deposited into your emergency fund.

Where to save your money

To avoid accidentally spending your emergency fund, it’s best to keep it independent from your daily spending money. An account entirely separate from your day-to-day spending, like a Tax-Free Savings Account (TFSA), which is available to most Canadians over 18, subject to certain conditions, will help you keep your emergency fund out of sight and keep the temptation to spend that under control – while also earning interest. Another great reason why keeping your emergency fund in a savings account is beneficial is because the funds can be accessible when needed and not in Guaranteed Investment Certificates (GICs) or investments.

Limit financial stress

Emergency funds have both tangible and intangible benefits. Not having an emergency fund might be causing you low-grade financial stress, and you don’t even know it. Emergency funds can unburden you by giving you the peace of mind that life’s unexpected moments are covered, leaving you free to focus on your bigger goals. Practically speaking, giving yourself a financial safety net means avoiding relying on high-interest credit to make ends meet when a financial emergency happens.

To take the first step toward building your emergency fund, check out Desjardins’ free online budgeting tool to get started.

This is paid content produced by Desjardins.

This is not CBC journalistic content. To learn more click here

Scroll top

Single Line Text

Skip to main Content. here. Read other stories. "Artists will always make it work" From advertising to barbering to mental health care. 4 helpful tips to start saving for your financial goals. Rediscover season 2. Rediscover season 1. Young workers | Desjardins. Financial Services for Post-Secondary Students | Desjardins. Saving for the long term is an essential part of reaching your money goals, but what happens when an unexpected expense pops up? Emergencies, from minor costs like car repairs and vet bills to larger ones like job loss or illness, can potentially hinder your financial progress. In these cases, having a dedicated emergency fund can bridge the gap between cash coming into your account and money that needs to come out. Why you should think about having an emergency fund. You may not think you need an emergency fund, especially if you have easy access to credit, but emergencies can come in many different forms. For example, you may be able to use credit to cover a small emergency like car repairs, but a bigger crisis, like losing your job, could present a real financial problem over a longer time. Covering bigger emergencies with credit is possible, but it could set you back financially. Emergency funds can prevent that. The right amount to save for emergencies. When deciding how much money to save for emergencies, start by looking at your fixed expenses. Fixed expenses are costs that don’t change monthly, like rent and debt payments. Your emergency fund should cover three to six months of your fixed expenses. For example, if your fixed expenses amount to $1,000 per month, your emergency fund should hold $3,000 to $6,000. If that amount seems too daunting, focus on saving a smaller sum, like $1,500, and work your way up from there. How to build your emergency fund. The easiest way to reach an important savings goal is to automate it, and emergency funds are no exception. You can set it and forget it by setting up pre-authorized transfers. Then, a set amount of money will be withdrawn every payday from your account and deposited into your emergency fund. Where to save your money. To avoid accidentally spending your emergency fund, it’s best to keep it independent from your daily spending money. An account entirely separate from your day-to-day spending, like a Tax-Free Savings Account (TFSA), which is available to most Canadians over 18, subject to certain conditions, will help you keep your emergency fund out of sight and keep the temptation to spend that under control – while also earning interest. Another great reason why keeping your emergency fund in a savings account is beneficial is because the funds can be accessible when needed and not in Guaranteed Investment Certificates (GICs) or investments. Limit financial stress. Emergency funds have both tangible and intangible benefits. Not having an emergency fund might be causing you low-grade financial stress, and you don’t even know it. Emergency funds can unburden you by giving you the peace of mind that life’s unexpected moments are covered, leaving you free to focus on your bigger goals. Practically speaking, giving yourself a financial safety net means avoiding relying on high-interest credit to make ends meet when a financial emergency happens. To take the first step toward building your emergency fund, check out Desjardins’ free online budgeting tool to get started. This is paid content produced by Desjardins. This is not CBC journalistic content. To learn more click here. Scroll top.