When planning your finances, most people focus on daily banking, budgeting, managing debt, and saving for retirement. But what about setting money aside for unexpected emergencies?

Today a few Canadians don’t have an emergency fund, and some just have enough to cover one month’s expenses. If you lost your job, fell ill, or faced major home or car repairs, would you be able to cover your bills?

What Is an Emergency Fund?

An emergency fund is your financial safety net, helping you avoid debt when unexpected costs arise. It’s not for vacations or splurges—think of it as your personal insurance policy to cover large, unforeseen expenses or time off work.

You can keep your emergency fund in a chequing or savings account, or in a tax-free savings account (TFSA) for easier access when needed.

How Much Should You Save?

A common guideline is to save 3-6 months’ worth of expenses to cover your essential costs in case of income loss. However, I recommend basing your savings on your monthly income to ensure better coverage. If you’re focused on paying off debt, start with a smaller emergency fund—around $2,500 to $5,000—to handle minor emergencies while prioritizing debt repayment.

Six Tips to Build Your Emergency Fund

1. Calculate Monthly Expenses: Add up your housing, transportation, bills, groceries, etc., and multiply by 3-6 months to find your target emergency fund amount.
2. Cut Costs: Reduce spending on non-essentials like coffee or dining out, and divert those savings into your emergency fund.
3. Automate Savings: Treat your savings like a bill. Set up automatic transfers into your emergency fund on payday to build it effortlessly.
4. Start Small: If you can only save $10 per week, start there. As you adjust, gradually increase the amount.
5. Maximize Interest: Use a high-interest savings account to grow your fund faster..
6. Save Your Windfalls: Direct tax refunds, bonuses, or other unexpected income into your emergency fund to grow it without affecting your day-to-day budget.

Building an emergency fund takes time, so don’t worry if it feels overwhelming. Start small and stay consistent—the sooner you begin, the better prepared you’ll be for life’s unexpected challenges.

Ready to Build Your Emergency Fund?
Don’t wait for the unexpected to catch you off guard—start taking control of your financial future today! Whether you need help setting goals, choosing the right savings account, or creating a personalized financial plan, I’m here to guide you every step of the way.

Contact me to learn how to build a solid emergency fund and secure your financial peace of mind, or explore our services at Finance with Yomi. Your financial safety net starts now!