Emergency Savings Is Not A Budget Category You Should Forget
So many Canadians live paycheque to paycheque and that is a bad way to keep financial stress off the table especially when emergency savings are critical.
Emergency savings are not for the rich people they are for everyone so ditch the poor me mindset and look after yourself.
Not many people think about having an emergency savings fund until something drastic happens to them.
That’s when panic sets in and everything falls apart.
Here’s my thinking, it’s better to have some of the money to pay for something than nothing at all.
Blaming yourself after the fact or perhaps blaming others like your employer for not paying you enough, bad relationships or family issues won’t matter.
The fact of the matter is that you need one and no matter what situation you are in you must find a way to save.
What is an Emergency Savings Fund (ESF)?
An Emergency Savings Fund is money that you set aside each month for many reasons such as
- Job Loss
- Death (Sometimes a Spouse’s bank account can become Frozen upon death by the bank)
- Injury or Health-Related Problems
- Unexpected expenses ie: Furnace- A/C- Vehicle-Roof
- Disaster of sorts
- Peace of mind
- A bucket of change in your closet or money under your mattress–This is only good for rainy day spare coin to save you from going to the ATM.
- Line of Credit, HELOC (home equity line of credit)– This is where you remove money from the equity that you’ve paid into your home. Some people use this as their emergency fund however I would suggest this as a last resort.
- Family and Friends– Thinking you can run to your family each time there is a crisis may be draining on friends and family.
- Pay Day Loans– Please, Please don’t get caught in this revolving door. Pay Day Loans are simply loans that cost you a fortune until your next pay-day. That still means you are short to pay the next bill and the next…….
I can remember from a young age that I would always keep a buffer in my Savings Account.
However, I was terrified to see that I had no money in my bank statement book.
I’m not sure why that terror took me on at such a young age but it’s never left.
Although, I don’t even think the term “Emergency Savings Fund” was coined back then.
Stashing Your Emergency Savings Fund
Where to put an emergency fund
There was always something tearing away inside of me about keeping my account above $3000 at all times.
If I dipped below that mark I knew I had to push harder to save more.
Today most people simply keep their emergency savings in a separate high-interest savings account or in a TFSA.
Some like to invest their emergency savings but if the risk doesn’t sit well with you perhaps going the simple route is best.
Keep in mind in the above scenario I was young, living at home, no vehicle, rent or groceries to pay for.
So what was the big deal?
Why was I so worried about that savings account? Somehow I developed a need to think into the future and I still do this today.
Is it a bad thing?
I don’t necessarily think so but I try to balance my forward-thinking with the present.
I believe forward-thinking and planning for the future to be imperative when financial planning.
I know what I did as a child with no known budgeting or money management skills is now on every financial guru’s budgeting list.
If one continues to only think about today it could be eye-opening if you are not ready for something that could happen tomorrow.
What if we didn’t have credit cards, lines of credits/loans and leases.
Do you think everyone would pay cash and live happily ever after?
I doubt it.
People would continue to spend as if nothing else mattered.
Understanding The Meaning Behind An Emergency Savings Fund
What does an Emergency Fund mean to you?
This is what having emergency savings means to me:
It means a feeling of waking up in the morning and knowing that if something were to happen today we’d be fine financially.
In the event, there is a pandemic such as the 2019 coronavirus we’ll be ok if we need to self-isolate and can’t work.
Not all employers will continue to pay you if the government forces people to stay home from work.
We would not crumble with despair because we are unable to work and little to no income is coming in.
If you’ve never experienced the debt-free feeling it is the best feeling in the world after LOVE.
Money matters can cause stress-related illnesses so preparing for an emergency might help ease some stress.
Related: How To Stockpile Food To Save Money
Tips For Saving Money For Emergencies
How hard is it to Save for an Emergency Savings Fund?
Saving for an emergency fund can be as little as $10 a month or as we like to do, budget it right in, similar to paying ourselves first.
You should never feel guilty about saving money because one day you’re really going to need it.
I know so many people who feel as if they should live their life now instead of dying with a full bank account.
That’s your prerogative but perhaps finding a balance between life, death and emergency situations would suffice.
The type of monthly budget we use is called a zero-based budget where everything gets paid first including our investments and whatever is left goes into an emergency savings fund.
We budget around 15% of our net towards our emergency fund although many times we save more.
Other examples of emergency funds:
Although, some months it doesn’t work as long as we stick to the budget our emergency savings fund is golden.
Emergency Savings Amount
How much money should I save for emergency savings?
When we started saving money we liked to keep at least 6 months to a year of expenses in our Emergency Savings Fund.
These days we have well over 6 figures in our emergency savings account and our tax-free savings accounts are maxed out.
Some people like to keep 3-4 months of emergency savings so it really depends on what makes you sleep better at night.
Living On A Tight Budget
I don’t have or make enough money to save?
If you tell me you don’t have $5.00 a month for an Emergency Savings Fund then I will tell you that you don’t need the pop, chips, video games, pizza, cable, cell phone, etc.
There were 9 things we quit buying that helped us work towards saving money and we did it.
You need the Emergency Savings Fund or face living on the streets, utilities shut off or creditors calling you.
You should prioritize your needs vs wants and always make sure to use a budget and keep it updated daily.
Scrutinize your budget and see where you can make changes even if they are not what you really want to make.
Many times friends tell me they are broke until their next paycheque yet they are texting me on their iPhone and driving a Mercedes.
I realize not everyone has spare money in the budget but all I’m asking is for you to do whatever you can to save.
Frugal Living And Saving For Emergencies
Living on a budget and not being able to splash money on things that you want is a harsh reality for many Canadians.
The problem is that if you don’t buckle down now when the time comes you won’t have anywhere to turn.
Look after your finances and take care of yourself and family while you have the means to do so.
Some Ideas on how to make frugal living changes?
- Learn about making your own laundry soap and save $5 a month.
- Use Vinegar to clean up your budget instead of purchasing costly cleaning supplies
- Use coupons to save at the cash– If you can save just $5 a month you can put that into your fund.
Buy Clothes at the second-hand shop– You can find so many great deals at second-hand shops. Save the difference in your ESF!
I hope I have inspired you to save a buck or ten and wake up feeling great in the morning knowing everything will be ok.
If not revisit the childhood story of The Little Engine that Could.
Never give up trying!
Discussion: How do you go about saving money in your emergency savings? What is your main reason for doing so?
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