When it comes to having an emergency fund, are you prepared if something were to happen? Your emergency fund is more than just a savings account, it should be ready for whenever the unexpected happens. Of course, we hope that you would never have to use such funds, but it is always better to be safe than sorry, especially when it comes to your financials.
So how do you start to prepare an emergency fund? Why do you need an emergency fund? Do you already have one you’re looking to grow or are you looking to start one? There are a lot of questions when it comes to having an emergency fund, that’s why we want to make sure you are on track and know your options in case something ever happened.
Financial experts claim that having an emergency fund is key financial stability and will reduce financial stress, as you won’t have to worry about money if it’s ever needed. 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 to stash funds away since your money is still easily accessible and won’t you don’t have to pay the taxes if you have to withdraw the funds. A TFSA is also recommended because your money is still invested and making money while in the account.
This is a great place to start when setting up an emergency fund, and there is no limit as to how much that you should contribute. For those who have funds stashed away, when was the last time to contributed to the account? Is it still enough based on your lifestyle to sustain you in case of an emergency? This is an account you should revisit every few months since our lives and money are always changing.
Want to know how much you should have put away in your emergency fund? RBC has a tool to help determine how much you should be putting away in case of an emergency based off of your current salary.
We know it’s tough to be saving for everything, which is why if you ever are stuck financially, GoDay is also here to help, including those financial emergencies.