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Accidents, mishaps, and emergencies can happen at any time.
They won't assume that you don't have any extra cash. They won't think you have a lot on your plate already. They just occur!
And if you don't have a plan to handle them, you'll be under pressure to find money and find ways to pay off all of your debt.
Do you understand what we're implying? You surely do if you've ever encountered a situation like that.
The best advice is always to save at least six months' worth of expenses in case of emergencies. But it's not easy, especially for Canadians who struggle to make ends meet.
So, where do you begin building wealth and filling your funds? Let’s find out.
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Having emergency savings is the need of the hour!
However, despite its importance, most people have no backup and are not even prepared to survive an emergency.
In fact, most Canadians live from paycheque to paycheque and have no saved money.
If you look into figures, that’s quite alarming.
It implies that most Canadians are unprepared for any emergency or accident. And that will only increase the stress and their anxiety in dealing with situations.
Or even make your necessary purchases and pay bills if you lose your job or source of income.
So, having an emergency fund is evident!
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It’s all about how you deal with the situation!
Even if you have no cash or separate funds for the emergency, you have to control your nerves and calm yourself to come up with a solution asap.
Once you’re relaxed and less stressed, start doing the math:
And, if nothing positive results after your catharsis, start taking a different thinking route.
Note: Remember to keep your current financial situation in mind if you decide to apply for a payday or emergency loan.
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Even a small $300 cash can be hard to deal with if you have zero savings or planning for an emergency.
In fact, only a quarter of Canadians have emergency funds for any unexpected situation.
Yes, the figure is low!
However, the emergency won’t be like, okay, you don’t have money for it, so let’s visit someone who’s somewhat prepared.
You know, it doesn’t work like that.
So, it’s only wise to prepare yourself and your accounts for any financial crisis. Here are some tips:
You need money for the emergency account.
However, it’s not easy to save money when you are on a limited income. So, you must devise an effective plan considering all your financial aspects.
You can also look for passive income ways to increase your money.
For example, the more you earn, the easier it would be for you to add something to your emergency fund.
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There is a good probability that you will use all of your income if you don't have a solid plan to spend your money wisely.
For example, 5% for your car loan, 5% for your savings, 5% for your emergency fund, etc.
If you have multiple income resources, dividing your paychecks and earnings would be easier and stress-free.
If you can’t seem to create a savings strategy on your own, you can consult a professional accountant or finance expert to guide you with the plan.
Here’s what you should do on your payday:
Start by taking baby steps to create your 6-month-worth emergency fund.
To accomplish your minor financial objectives and move closer to your larger
resolutions, you must be realistic and more aware of your financial situation.
For example, if your goal is to have $2000 for your 6-month worth of funds, divide the money into 6 installments.
The key is to treat these personal installments like any of your loan or bill payments.
Thinking about the future might skip your mind when you have to survive the present.
However, you can’t avoid the elephant in the room.
So, once you have opened your emergency account, start adding funds to it. And the best way to do that regularly is by automating your payments.
Here’s how you can automate your payments the easy way:
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The majority of financial education experts agree that you need to have an emergency fund with at least three to six months' value of living expenses covered.
But, how much is that money? Or, how much is enough for your emergency fund?
After doing the math, you’ll have a rough figure of what’s left. That’s the money you can use for your savings and emergency!
Of course, the actual amount varies from person to person as only you know how much you earn and how much you can manage to save.
See: How To Do Personal Finance Evaluation To Save Money!
Open your emergency fund with a traditional or online bank that allows immediate money withdrawal.
This factor is crucial as you never know when a bad time can strike you.
It's crucial that you pick the appropriate sort of account to grow your emergency savings.
Ensure the bank you have in mind will help you achieve your aim of creating an emergency fund.
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Emergency fund saves money you might need to use in case of any unplanned financial situation.
And, you know very well, everyone has to deal with emergencies at certain points in their life.
But, if you have no backup to help your cash flow in such situations, only your debt situation will grow.
Which is obviously the last thing you need in the bad times!
So, what is the best way to create an emergency fund? How much money should you put into it? Where should you build your emergency fund?
Find answers to all these and your other questions in this one guide!