“Save a little money for a rainy day” is a familiar idiom to many people, but if you’re like nearly half of Canadians, you don’t have funds for emergencies set aside for unexpected expenses.
A recent poll of approximately 2,000 Canadians by the CIBC found that 45% of them do not have funds set aside for unexpected expenses. Of all respondents, the least likely to have emergency funds were Ontario and Alberta residents, with 53% in each province stating they do not have such a fund.
Respondents from British Columbia, on the other hand, were the most likely to have an emergency fund set up—about 60% said they have a certain amount of money set aside for something unexpected. Residents of Quebec, Manitoba, and Saskatchewan also fared better in the poll, with 57% having emergency funds.
Financial experts recommend having at least three months’ worth of expenses—preferably more—set aside for something unexpected. This can include anything from car repairs to braces for the kids to unemployment. Living paycheck-to-paycheck without something to fall back on can be financially devastating, leading to increased debt to meet expenses or at worst, a consumer proposal or bankruptcy.
Even with little money left over each month, there are still plenty of ways to set some cash aside. It’s important to remember that something is better than nothing. TFSAs (tax free savings accounts), mutual funds, cash bonds, and regular savings accounts may have low rates of return, but they are safe and provide money when needed. Some financial experts also recommend establishing a secure line of credit on their homes, which can provide quick access to needed money.
As a very last resort, you could always cash in your RRSP, but it’s inadvisable because you can’t return the money and it’s subject to taxation once it’s withdrawn.
Even if you can only put away five dollars a week, it’s a place to start, you’ll hardly miss it, and it’ll be there when you need it.