In today's shaky economy, an emergency fund is more valuable than ever. You never know when life is going to throw you a surprise crisis. From your water heater dying to your car breaking down, you don't want to have to turn to a payday loan company to take care of basic survival needs.
An emergency fund gives you a financial safety net as well as peace of mind to handle the situation thoughtfully.
This article isn't a sermon, but rather a survival guide. Maintaining and managing a proper budget is the first step to live with less stress in your life, and having an emergency fund is an integral part of that plan.
Why Canadians Should Have An Emergency Fund
When adverse life circumstances happen, those without an emergency fund have no way to cope.
The CBIC shows that Canadians in British Columbia and the surrounding areas have less than a month’s worth of savings to handle an unexpected life event. As we saw in the Covid-19 panic of 2020, many people are at risk of going broke in just one month of unemployment.
Within British Columbia 45% of Canadians don't have an emergency fund. Ontario and Alberta residents appear to be the least prepared for a financial emergency.
We’ve taken the liberty to list five reasons why an emergency fund might be a life saver for you.
5 Reasons To Maintain and Manage An Emergency Fund
- What if your car breaks down? Unless you have some other form of safety net, you’ll be stressed out as well as carless. How will you get to work, pick the kids up from school, or run errands? Walk-in visits to the mechanic can be costly, and if you don’t have the cash on hand you may end up without wheels for weeks or even months. In a society highly dependent on cars, having some funds set aside for a transportation emergency is a must.
- What if you were suddenly laid off? In most workplaces, you could be laid off at a moment’s notice. Without a cash reserve to keep you afloat, how would you make ends meet? How would you take care of a family? If you don’t have a cash reservoir set aside, you’ll be in a rush to find a new job. You might end up accepting a job you hate in order to buy groceries. An emergency fund will free you to find a new job at your own pace.
- What if there was a serious illness within your immediate family? While we hope to live long and healthy lives, you never know when sickness will strike. If you end up calling out sick or taking an extended medical leave, you may lose your job. On top of that, medical bills can rack up quickly. Without any kind of fall back plan or savings, an illness can spell ruin for even the most successful people.
- What if you were faced with a divorce? Some couples rely on one another to stay financially afloat. Could you manage everything on your own? Divorce is at an all-time high, and it always pays to protect yourself. Having an emergency fund could save you from disaster during a difficult time, emotionally and financially.
- What if you face major home repairs or improvements? If you're a homeowner, you understand how expensive it is to address home emergencies. If you don't have enough home equity built up, the responsibility can fall on your shoulders. Whether it’s your AC going out during a hot summer or needing a roof repair during a rainy spring, some fixes can't wait. When storms, fallen trees, or broken pipes strike, it will definitely pay to have a small bundle of cash set aside.
Creating a financial plan now can save you stress and heartache later. Whether it’s setting aside a hundred dollars from every paycheck, foregoing morning lattes, or simply saving every five-dollar bill you receive, creating an emergency fund is a choice you won’t regret.