Why You Need an Emergency Fund and How to Save For It

Posted by zlcvancouver on May 20th, 2021

About 64% of Canadians have set aside an emergency fund that is enough to cover the costs of living for 3 months. The ideal emergency fund should be 6 months’ worth of your salary.

Why is there a need for an emergency fund? 

When the pandemic struck, many people were left without a job. With no emergency fund to tide them over, it has been a difficult year full of financial struggles. This is the reason why we need an emergency fund.

An emergency fund is called that because it will help us get through the worst financial moments in our lives. It’s not just a pandemic we have to prepare ourselves for. We also need to prepare ourselves for unexpected expenses at home such as plumbing or electrical system repairs.

Having an emergency fund gives us more peace of mind and ensures that we won’t have to use up our savings or even our retirement fund just to get us through some low financial moments.

So, how do you get started in saving up for an emergency fund?

Set a Goal

How much do you have to save to ensure that you have enough emergency funds? This depends on your needs. Some people are happy with at least three months’ worth of their salary as an emergency fund while others need more than that to feel more at ease.

As mentioned above, you can target getting at least 6 months’ worth of your salary for the emergency fund to give you a lot of buffers in case the unexpected happens.

Get a Separate Account for Your Emergency Fund

It’s best to create a separate account for the emergency fund so that you will not be able to touch it. If you use your primary banking account, you might inadvertently use some of that money for your daily expenses. It’s best to have a dedicated account for the emergency fund so that you will not be tempted to use it.

Set Aside a Portion of Your Monthly Income for the Emergency Fund

You can allot 5-10% of your monthly income. This depends on your monthly allocations. You can consult a certified financial planner in Vancouver to help you understand how much money you can set aside for your emergency fund. Your financial planner in Vancouver will help you understand your fund sources and help you create a more effective fund allocation.

Look for a reliable certified financial planner in Vancouver that will take your needs into consideration. Check out certified financial planner in Vancouver from ZLC Financial.

Automate the allotment so that when your salary comes in, a portion of it will automatically go to your investment fund. That way, you will not accidentally spend money on it.

Matt Knowles is the author of this article. To know more about Estate Planning Vancouver please visit our website: zlc.net