Get Started on an Emergency Fund Right Now

A little bit of precaution can go a long way, especially when it comes to your finances. An emergency fund is the perfect tool to help you handle any expensive repairs, bills, and other surprises. You don’t have to panic about the costs, wondering if you’ll need to take out a loan or beg your friend for an IOU. You can just dip into your fund and solve the problem right away.  

How to Make an Emergency Fund: 

The good news is that building an emergency fund is easy. You just need to cut some costs in your budget and add the savings to an account, adding a little bit more every week. Over time, you’ll build a comfortable fund that you can use whenever trouble strikes. 

Here are some of the ways that you can add more wiggle room to your budget:

  • Use the library to read new books 
  • Make energy-saving changes around the house to trim down bills 
  • Cancel unused subscriptions
  • Focus on homecooked meals over takeout
  • Avoid impulse buys and shopping for fun

How to Build a Fund When You’re Paying Off Debt:

It can be difficult to know how much to budget over the next 5 years for your emergency fund when you’re struggling to pay off debt. If that’s the case, you should seek out a licensed insolvency trustee and sign up for credit counselling. Credit counselling can help you improve your debt management, credit use and budgeting so that you can achieve your financial goals. You can get a better handle of your debt and your emergency fund efforts at the same time. 

Don’t dismiss an emergency fund as a distraction from your debt repayment. You’ll want to have some interest-free funds set aside to deal with surprise expenses. You won’t have to take out a loan, max out a credit card or skip payments to cover the costs. With this fund, you won’t be compelled to dig yourself into deeper debt to solve a problem.  

How Much Should You Have in Your Emergency Fund?

To start, you should have enough to cover small situations like a flat tire, a plumbing repair, or a dentist visit. Having approximately $1000 in your account will be enough to deal with these circumstances. As you continue saving, you should aspire to have between three to six months’ worth of expenses inside of your fund. This will help with serious situations like job loss or illness. 

Emergency Funds Are Rare

Don’t feel too guilty about not having an emergency fund on hand. You’re not the only one who has skipped out on this financial safety net. According to a poll by Manulife Bank, 24% of respondents didn’t know how much they had saved in their emergency fund, and 9% had $1000 or less. A whopping 14% of respondents admitted to having no emergency funds whatsoever, leaving them vulnerable to any expense outside of their monthly budget. 

It’s understandable that so many people skip out on these savings. They’re too focused on organizing their budget for their weekly needs, paying down their debts and planning for other future goals like post-secondary education or retirement. 

There’s no telling when you’ll get hit with an expensive surprise. You might as well start protecting yourself now and work on an emergency fund.