An emergency fund is money you set aside to cover unforeseen expenses. Whether it is a possible job loss or a medical crisis, life is full of unpredictable events. At some point in your lifetime, you may face such an event, and that’s when an emergency fund may come in handy.
Possible emergencies include but are not limited to the following:
- Car repairs
- Job loss
- Health problems or acquired disability
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Statistics on Canadians and Emergency Funds
The MNP Consumer Debt Index paints a bleak picture for many Canadians, with 53% of survey respondents reporting that they are $200 or less away from financial insolvency at the end of each month. This statistic is from March 2021 and represents a 10-point jump from December 2020.
Statistics Canada paints a similarly stark picture. In fall 2022, over one-third (35%) of Canadians reported that it was difficult for their household to cover their expenses in the past twelve months, and a further 26% said they would be unable to cover an unexpected expense of $500.
Young people were among the most concerned about their finances, with almost half (46%) of people between 35 and 44 years of age reporting that they struggled to meet their financial obligations in the past twelve months. This was the highest proportion of any age group.
Statistics Canada also reports that financial optimism steadily declined for older age groups after hitting its peak for those aged 25-34.
What these surveys have in common is exposing a high proportion of the Canadian population who are just one step ahead of insolvency and therefore lack an emergency fund. While Canadians’ financial wellness varies from month to month and year to year, a huge segment of our population is struggling due to low wages and a high cost of living.
How to Build Your Emergency Fund Quickly
To start, open a savings account. This account must be separate from the account you use for your day-to-day transactions, have low or no transaction fees, allow you to make withdrawals without penalties, and generate interest on the money you save.
Start small and realistic. Even $5 saved every week will amount to $260 in savings per year, not taking things like interest or tax implications into account. Meanwhile, $20 saved per week could amount to something like $1,040 saved per year. Don’t bite off more than you can chew – save slowly but steadily. Over time, you will succeed in building an emergency fund. This will help to reduce your financial stress.
Conclusion
While many Canadians find it difficult to save any money, building an emergency fund can start with a small weekly or monthly amount of savings and progress from there. Prepare yourself for life’s uncertainties with an emergency fund. It is never too early to start.
Having an emergency fund is an excellent measure of one’s financial health, along with things like your credit score and monthly budget. To check your credit score and other important financial information, sign up for Credit Verify! Registration is fast and easy. Financial health is a journey, not a destination, and requires consistent effort and multiple metrics. Take back the helm with Credit Verify.
