Friday, 16 June 2017

Where to start? Emergency funds

Save your pennies (and nickels and dimes and quarters...)
Hello again,

Everybody has their little indulgences, and we all love to have the luxury of being able to afford these extras.

But what about when the choice is taken away from you and you can’t have those extras? At some point in our lives, almost all of us will run into financial trouble. When that time comes, an emergency fund becomes indispensable.

What do I mean by an emergency fund? Well, an emergency fund is money that you have put aside beyond your personal savings so that if you run into financial trouble you can afford your bare necessities.

How much should you try to keep in your emergency account? A good rule of thumb is three- to six months’ worth of funds for your bare minimum budget so that if you end up in a bad situation where you need cash quickly, you aren’t having to turn to credit or loans. The ultimate goal is to have this fund completely separate from your other savings so that you always know you will be covered if the unforeseen happens.

While most of us feel we can’t live without certain creature comforts such as dinner and drinks out with friends, expensive clothing and top-shelf foods and beverages, in our hearts we know we can. It isn’t always easy, but when the choice is down to going out for drinks or making this month’s bills, the guesswork disappears pretty quickly.

When building your emergency fund, the general rule is that you should try and put away about 10 per cent of your income from each pay. In simple math, that means that $100 of every $1000 you make should go into a separate bank account. Ideally, that account won’t be tied to your primary debit card. If it’s possible, put them in two different banks (I keep to no-fee banks) and don’t carry the emergency card. One of the best things you can do is remove temptation from the equation.

It is always good to have a contingency plan. It’s also a great feeling to know that if something bad happens, while you might not be able to indulge your caviar tastes, you can still live on that bologna budget.

What are your thoughts? Do you have an emergency fund? Please share how you went about savng for your emergency fund in the comments.



  1. I keep about 2-3 months worth of emergency funds in a separate bank account. I also have 2-3 months worth of spending in my normal checking/savings bank.

    I will use it for more than just emergencies though, if there is a stock that becomes on sale I will use the funds to buy it and then build the account up again.

    1. When you are stable you can definitely make those calculated risks. It's a very smart way of doing things.

  2. I read a really great book on finance and getting out of debt. It's literally a step by step and this year I have paid off more than a couple grand in debt when in previous years it felt like I barely put a dent in it. Step one is to start an emergency fund. You budget your entire paycheque and leave no money for "fun" spending until you have an emergency fund of $1000. You then proceed with the other steps and once debts are paid off you build up that emergency fund. The goal is to have enough emergency funds to equal 3 months salary or 3 months of expenses. I think it's a great idea, if you ever unexpectedly loose your job, you know bills/food/rent/mortgage are completely covered for 3 months.

    I feel it's a process, but it's a HUGE stress reliever!


    1. I agree whole-heartedly, Brittany. It's not easy being responsible with money, but we all have to be adults sometime, right?

      If you can remember the name of the book, I would love to take a look!