A lot of people think that because they have savings, they will be financially okay in an emergency. But do you have a specific set of funds dedicated to an emergency fund for when you really need it? Any form of savings are helpful, but in the case of a financial emergency, you should always be prepared.
According to Investopedia, an emergency fund is an account used to set aside funds needed in the event of a personal financial dilemma, such as the loss of a job, a debilitating illness or a major expense. The purpose of the fund is to improve financial security by creating a safety net of funds that can be used to meet emergency expenses.
Starting an emergency fund
It’s recommended that an emergency fund contains enough money to cover at least three months of living expenses. While the basic rule of thumb is to have enough money to cover at least three months of net income, even that may not be enough the Globe and Mail states. So where do you start saving this kind of money? It’s recommended that a TFSA is the best account since funds are easily accessible and won’t you don’t have to pay the taxes when you withdraw the funds, but your money is still invested and making money.
When to use it?
The only time to use your emergency fund (which is why it should be different than a regular savings account) is when you need to prepare for the financially unexpected. And no, shopping sprees don’t count. Emergency funds are most commonly used in cases such as a job loss or unexpected big expense (like car or appliance) needs to be replaced when you need a lot of extra cash on top of your current expenses causing them to double or more.
Getting over the financial bridge
It is when financial strains happen that people turn to GoDay. So in the case of a financial emergency and people do not have the savings or emergency fund available, GoDay can get you the cash you need in 24 hours. Since we partner with the most reputable financial institutions and uses the fastest tools in the industry to make sure you get the speediest service possible, you can apply from your computer or mobile device and our highly automated system will do all it can to ensure you receive your funds as soon as possible. Nobody likes surprises when it comes to money that’s why when you use GoDay, we know you’re in a pinch and disclose all fees up-front, including those you’ll be required to pay if you default on your loan.
RBC has a tool to determine how much you should have saved in case of an emergency based off of your current salary.