Emergency fund

[Reyshel01]

How did you start saving for emergency? Like what amount did you start with?

[Hugh Jass]

Depends on what you deem to be an emergency and what your circumstances are. For example, if you're a homeowner, you may want an emergency fund for a leaky roof etc, if you're self-employed, you may want to have an emergency fund for when work is slow and/or you want some time off.

[Reyshel01]

Well I've been contributing $50 to my RRSP for 2 years now but I lock it with higher interest. I just want to start putting $50 since I only work part-time..

[Hugh Jass]

Well I've been contributing $50 to my RRSP for 2 years now but I lock it with higher interest. I just want to start putting $50 since I only work part-time..

Whatever you can afford to put aside. RRSP shouldn't really be considered part of an emergency fund coz it costs to withdraw it. Emergency fund should be fully liquid, even cash.

[chevron]

I think available revolving credit + some reasonably liquid investments is a more elegant solution than large amounts of cash sitting around earning very little.

Start saving by spending less than you make, it's not complicated.

[Reyshel01]

My only expenses would be my phone $45.20 a month

[Frosc]

I like to keep ~6 months living expenses in fairly liquid assets for Emergency funds.

[Asoul]

I started my emergency fund by putting 10% of whatever I made into a High Interest Savings account seperate from my normal banking. Out of sight, out of mind.

I would not suggest you use RSPs for a emergency fund because of witholding tax and RSPs are meant for a different goal, I would use a TFSA instead.

[Reyshel01]

My RRSP is not for emergency..

[ccyk]

my untapped credit card is my emergency fund...

[TrevorK]

I use a line of credit as an emergency fund because it allows me to invest my actual money elsewhere. If there comes a time that my LOC is revoked unknowingly to me then there is probably a nation-wide/world-wide situation that is much more dangerous to my financial well being.

What sort of emergency events are you trying to plan for that aren't covered by things such as provincial health care/social safety net? It may be more reasonable to explore other options than an emergency fund for these (such as additional medical coverage, etc.).

[pchi]

A good emergency fund is usually 3 months of your current salary or more. Really it starts with any amount that you can afford to save!

Your only expenses is your cell phone? Do you have someone supporting you?

[rob444]

I use a line of credit as an emergency fund because it allows me to invest my actual money elsewhere. If there comes a time that my LOC is revoked unknowingly to me then there is probably a nation-wide/world-wide situation that is much more dangerous to my financial well being.

What sort of emergency events are you trying to plan for that aren't covered by things such as provincial health care/social safety net? It may be more reasonable to explore other options than an emergency fund for these (such as additional medical coverage, etc.).

+1. Every single persons situation is different, and there is no generic 1-size-fits-all solution such as everyone must save 3 or 6 months or whatever of income as emergency fund.

Personally, i have worked at my job long enough that i'll receive well over 6 months worth of income if they ever let me go... i have a critical illness insurance policy to cover the most common savings-draining illnesses... and a low interest HELOC i can use in case of any unexpected expenses (perhaps helping a family member, pet illness, house repair etc). Even if i had to suddenly borrow $10K from my HELOC, i could adjust my spending/saving and have it paid back in a very reasonable time.

IMO keeping a big chunk of money tied up in a reasonably low interest safe place like a savings account "just in case", is a waste of potential long term retirement income considering the low chance of a real emergency actually happening. I would prefer to invest that money in things with a higher growth potential in something like a TFSA (that of course you could still cash out if needed). But i dont call this an emergency fund, i call it a regular investment that can be used in case of emergency.

Of course i can see how someone with a non-stable job or with other concerns may want to have a guaranteed liquid fund just in case. But each person should be analyzing their own situation and coming to their own conclusions as to what is the correct method here.

[CanadianinCanada]

Initially, it is not about how much you save, it is about getting into the habit of saving.

Depending upon your income and your personal expenses, you may choose one of the various methods of saving available in the market. TFSA is a good one for emergency saving as you can save 5K every year and then if you do not need it, put it away in long-term savings - RRSP etc.

You can start with a low amount but make sure that you have standing instructions to your bank to take away this amount to your TFSA account at a certain date every month. After few months, you will not even feel that you are putting this money in a different account. Slowly, start increasing your saving amount.

First step is the toughest one, later, you won’t even feel it.