Apr. 3 – Emergency Funds

April 3, 2025

Building an emergency fund essential, experts say

These days, with so much uncertainty swirling around the economy, inflation, and trade, experts suggest that socking away money in an emergency fund may be a wise move.

Save with SPP took a look at what the experts are saying about emergency funds.

The Winnipeg Free Press calls emergency funds “an absolutely crucial part of any financial plan, regardless of the life stage or situation.”

“For people who already have high-interest-rate debt, having an emergency fund can help guard against resorting to additional high-cost financing in a pinch. It also helps you defray unexpected expenses without needing to raid your retirement accounts,” the newspaper reports.

“Finally, the big reason to have an emergency fund is to cover your basic costs in case of job loss,” the Free Press adds.

The paper suggests that your minimum target savings amount for an emergency fund should be three times your basic living expenses – that’s “housing costs, utilities, food expenses, servicing debt, insurance and taxes.”

You can subtract any savings you already have from that minimum target and then begin adding savings to make up the gap, the Free Press notes.

The folks at MoneySense set out some of the advantages of having an emergency fund.

A fund, the publication reports, can be put into use when you face:

• “Urgent major repairs (not renovations) to your home or car.”
• “Unexpected medical expenses not covered by universal health care or insurance.”
• “Lack of income due to job loss.”

“Just like the name implies, an emergency fund is meant for emergencies. Unexpected events happen in life: the car breaks down, the fridge stops working or you get laid off during a recession. Without an emergency fund to help cover your expenses, you could end up paying bills with a credit card, relying on payday loans or heavily using your secured or unsecured line of credit,” reports MoneySense.

Having to go that route means your emergency is costing you an additional 19.99 per cent (if paid via credit card) or an eye-popping 442 per cent if paid via payday loan, the publication warns.

Forbes magazine notes that your savings target will be larger if there are more people in your household than just you. Base your monthly expense number not only on your expenses, but all the expenses you cover for everyone under your roof, the magazine suggests.

Finding money to divert to your emergency fund may be as simple as trimming the “non-essentials” you spend money on, such as “clothing, entertainment, and dining out.”

“Go through the list of things you normally spend money on that aren’t actual needs and consider what you can reduce or eliminate,” the magazine suggests. If that doesn’t work, you may need to aim for a higher income.

“Consider ways you can make more money each month. This may include taking on extra hours at work, getting a part-time job or starting a side hustle. Even selling things around the house you no longer need can help. The more money you can bring in, the more you can add to your emergency savings,” Forbes advises.

Forbes concludes by suggesting four steps to help build your emergency savings:

• Make savings automatic – make an automatic deposit to your savings account every pay day.
• Save “windfalls,” like tax returns, rebates and “other unexpected financial windfalls.”
• Use “cash back” apps or cards and direct the money to savings.
• If you are getting tax refunds every year, considering reducing the tax withheld from your pay and adding the difference to your emergency fund.

Writing for GoBankingRates, Caitlyn Moorhead suggests a few more saving ideas for boosting the balance in your emergency fund.

Find a chequing account that also pays interest, and move the interest received to your emergency fund, she writes. Cut back on your cable package and bank the savings, she continues. Be a stickler about sticking to your grocery list, she advises, and develop a meal plan that is based on weekly grocery sales. Bank the extra money.

In fact, you consider your emergency fund to be a bill, she writes. Huh?

“When it comes to financial planning, it’s a lot easier to part with the money you put in savings when you take on the mindset that it’s just another bill. Instead of looking at saving as an optional move, think of it as a mandatory expense like paying rent or your phone bill. That way when unexpected expenses arise, you already have it covered,” she concludes.

We’ll add a few we used when building up our savings. Lottery ticket winnings can be banked. When you roll up your change, you can deposit it in your account. And when you get a payout from your dental or vision insurance, you can pop that into savings.

The same tactics listed in these articles can be used – perhaps once you have built up that emergency fund – to save for retirement. And a great vehicle to speed along that savings journey is the Saskatchewan Pension Plan. You provide the savings, SPP provides the investment expertise, and will grow your hard-earned loonies in their low-cost, professionally managed pooled fund. When it’s time to retire your choices include a lifetime monthly annuity payment or the more flexible Variable Benefit.

Check out SPP today!

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Forbes, GoBankingRates, MoneySense, Winnipeg Free Press

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