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If you had an unexpected expense or suddenly lost your job, how would you support yourself? See how an emergency fund could help.
An emergency fund is a sum of money saved to cover major expenses, such as unexpected repairs, medical expenses or household bills, in case you lose your main source of income. Having an emergency fund allows you to avoid using your retirement savings or turning to high-interest debt options, like credit cards or payday loans, to make ends meet.
Experts recommend saving a set amount each month until you have enough to cover three to 12 months of household expenses, depending on your situation and profession. However, the more you can save, the better off you’ll be should you need to access this money.
Emergency funds should be easily accessible, so don’t put them in a registered retirement savings plan (RRSP). Instead, try a high-interest savings account or a tax-free savings account (TFSA). A good option is a high-interest savings account (HISA), which pays more interest than a regular savings account.
Example: “My fridge broke, but I had enough money in my emergency fund to get it fixed.”
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