Emergency Funds

A well designed financial plan is essential for reaching your goals. However, there are many unforeseen and uncontrollable events that can trip up even the best plan. Your car may suddenly require costly repairs or your roof could start leaking. What if you suddenly fall ill or lose your job?

Rather than relying on luck, it makes sense to put money aside in case of an emergency. An emergency fund is an essential part of a well-designed financial plan.

How much should you put aside for emergency savings? No less than three months of your total monthly household expenses. Where should you put your emergency savings?

  • You can open up a separate savings account just for your emergency fund.
  • Savings can also be inside a Tax-Free Savings Account (TFSA).
  • Your emergency fund should be readily available and accessible.
  • An RRSP is not a good option for emergency savings because a portion of your withdrawal will be withheld for tax.

Should you use a line of credit? It may make sense to supplement your emergency savings with a line of credit. However, you should avoid using credit for more than 50% of your emergency funds, as whatever you borrow must be repaid with interest.

Life Events

You may wish to save more than three months of living expenses to ease your transition into a new situation due to a life event. In this case, consider the following guidelines.

  • Six to twelve months of living expenses may be appropriate if you are expecting a child, especially if an extended maternity/paternity leave is planned.
  • Six to twelve months of living expenses to ease your transition into retirement.

To plan for an unexpected job loss, estimate your monthly living expenses (not covered by a spouse/partner’s income) and multiply that amount by the number of months you conservatively may be out of work. Subtract this amount from any severance payment you receive. Set it aside in your emergency fund. Once you are reemployed, any surplus cash can be redirected. If you choose to transfer some or all of your severance to a RRSP, to tax-shelter the payment, it may be necessary to hold some cash, for emergency purposes, within your RRSP. 

Emergency Savings Calculator

Having adequate emergency savings can make unforeseen unemployment, auto repairs, medical emergencies, property damage and even legal issues more manageable. With adequate emergency savings, you can focus on how to best meet your family's needs, rather than worrying about finding the money to handle these difficult situations. This calculator helps you determine how much emergency savings you may need, and how you can begin saving toward this important goal.


Information and interactive calculators are made available to you only as self-help tools for your independent use and are not intended to provide investment or tax advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.