3 tips to start saving today.
Your washing machine breaks. You have a leaky roof. You lose your job. Your child gets sick. No matter how well you plan, you simply can’t predict if and when unexpected expenses are going to arise — and inevitably they will. When an emergency happens, your paycheque may only go so far toward covering costs, and you’ll want to avoid going into debt or dipping into your retirement or long-term savings funds.
And if you’re a parent or a parent-to-be, an emergency fund is critical, because you now have someone else depending on you. If you haven’t been saving enough — or at all — you’re not alone.
In fact, according to the Annual BMO Rainy Day survey, 24 per cent of Canadians have not saved for a financial emergency. Fortunately, it’s never too late to start saving, and it can be easier than you think!
- Open a separate account for emergencies: You may want to consider a high-interest savings account, as they’re easy to access quickly in case of an emergency while still offering you interest. By making small adjustments to your spending (bringing lunch instead of eating out, for example), you may be able to contribute at least $10 or $15 a week into your account.
- Make it a habit: Once you’re used to setting money aside regularly and dialing back spending, you can gradually increase the amount you save. Opting for an automatic savings plan can make the entire process painless. You’ll enjoy seeing how fast your balance can grow, when you keep savings steady. For a little more help, read Change your spending habit into a saving habit.
- Fully fund it: Financial experts suggest that an ideal emergency savings fund should include anywhere between three to six months of your income — enough to cover everything from your mortgage to groceries to insurance to clothing. It provides peace of a mind, while reducing the risk that you’ll have to take on debt to deal with the unexpected.
But don’t worry about coming up with the exact figure to put aside. The important thing is to start an emergency fund, no matter how small, and to contribute regularly. Talk to your financial planner about how to start an emergency savings fund so that when life’s little emergencies do occur, you won’t have to panic. You can make an appointment with BMO online, and we’ll be happy to help!