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Is your emergency fund enough for the unexpected?

By ATB Financial 22 January 2024 6 min read

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How much should you have saved? Find out with our Emergency Savings Calculator.

Emergencies aren’t the first thing people think about when it comes to a saving routine. We get it - retirement, education, home renovations, and upcoming vacations all seem like more exciting ways to use your money. However, having money set aside for an emergency is crucial, and unfortunately, most Canadians feel unprepared. A Global News article reported that nearly 70 per cent are worried they can’t absorb any unexpected costs worth $1,000 or more, and half (53 per cent) are concerned they might not have enough money to put food on the table for their family. That means that for more than half of the population, something like an unexpected car or home repair could wipe out their savings almost instantly.

While we never want to deal with unexpected expenses, they’re a natural part of life. Being financially prepared for emergencies will give you peace of mind, and it can help save you money in the long run too.


Why start an emergency fund?

Having an emergency fund in place to support you through difficult times, might save you from going into debt or being forced to dramatically alter your lifestyle should the unexpected happen. If you can draw on your emergency fund when faced with surprise expenses, you’re more likely to avoid paying interest on a loan, line of credit or credit card you might otherwise use to cover that cost, and you’ll be able to maintain your standard of living as you navigate the tough times.


Personal finances, personal truth.

So how much should you save? When you’re deciding how much to put away in an emergency fund, start by considering your current costs. We recommend taking a look at your finances and determining your fixed and non-fixed monthly expenses. Expenses to consider include: 

  • Mortgage or rent
  • Utilities (gas/water/electric/heat)
  • Phone bills
  • House or car insurance
  • Transportation costs (including gas, transit, or Uber)
  • Groceries
  • Credit card debt, personal loans or other debt
  • Pet costs
  • Other (any other regular monthly costs you have)

Once you have a better understanding of your average monthly expenses, we recommend saving enough to cover at least three to six months worth of expenses in case of job loss or unexpected expenses like home or auto repairs, illness, natural disasters or pet emergencies.


Emergency expenses in Alberta

Job insecurity

As of December 2023, Alberta’s unemployment rate was 6.3 per cent, which is 0.5 per cent higher than the national rate. While job loss is a concern for most people, the boom-and-bust tendencies of Alberta’s energy-based economy make it an especially pertinent issue for Albertans. According to Statistics Canada, 26 per cent of Canadians said they would not be able to cover an unexpected expense of $500.  As mentioned above, it is best practice to save up three to six months worth of living expenses to account for the possibility of job loss and give yourself some time to find new employment. For example, if your monthly expenses are $5,000, you should have upwards of $30,000 stashed away in an emergency fund.

For the increasing percentage of Albertans who are self-employed or employed as contractors, there’s a built-in sense of job insecurity. It’s often impossible for self-employed people to predict future income, even when they are currently able to find steady work.


Auto accidents and repairs

Owning a vehicle provides a lot of independence and makes everyday living easier for many people, however regular car maintenance, major repairs and even collisions can take a toll on your wallet (and in some cases your insurance premiums too). 

According to a Canadian Automobile Association (CAA) poll, two-thirds of Canadians (67 per cent) don’t know the cost of owning and operating a common vehicle for a year, and in most households, transportation costs are the second-biggest monthly expense.  For a compact vehicle, routine scheduled maintenance costs can range from $500 to $700 per year. That doesn’t include unanticipated major repairs or necessary major purchases such as replacing old tires. Tracking the costs of vehicle ownership, keeping your vehicle well maintained and having an emergency fund will help make unanticipated repair costs feel more manageable.


House repairs

Our homes are our sanctuaries, but they do require consistent attention, and home repairs are part of the responsibility of home ownership. Plumbing work, electrical upgrades, a new furnace or a new roof are some common areas to address (and pay for) when you own a home, and could cost anywhere from several hundred to several thousand dollars. The Government of Canada offers a Guide to Home Repair and Maintenance, helping homeowners troubleshoot issues before they become big problems. 

Staying on top of regular maintenance, learning some basic DIY skills, knowing when to call an expert and saving for future repairs are all ways you can protect what may be your biggest lifetime asset.


Illness and injury

We’re lucky to live in a country that prioritizes public health care, but keep in mind that some medical expenses, such as ambulance rides, dental and optometry services, experimental treatments, hearing aids, and prosthetics are not covered under Alberta Health Care.

Another expense not covered by provincial healthcare is the wage loss suffered by people with chronic illnesses and by their familial caretakers. While some federal programs like EI and the Canada Pension Plan can offset lost wages, they are subject to strict rules, and if you are able to claim these benefits, you may not be able to receive the funds as quickly as you need them.

If you’re a pet owner, you’ll also want to factor in the potential costs of veterinary care for this very important family member. 


The escalating effects of extreme weather

Albertans are no strangers to natural disasters, from floods and fires to blizzards, hail and droughts. Not only are the frequency and intensity of extreme weather in Alberta on the rise, but property damage and the cost of insurance are also too.

Insurance Business Magazine reported that Alberta had more than $330 million in insured losses in 2023, with more than $100 million allocated to the repair and replacement of vehicles affected by hail and floods. Overall, Alberta has witnessed insured losses surpassing $4 billion since 2020. 

This means that we can anticipate seeing insurance rates continue to rise in the years to come, and in some cases, certain situations may become uninsurable or more expensive to insure.


Best ways to save

Regardless of which emergencies you decide to prepare for, it’s a good idea to keep your emergency savings in a separate account so that you don’t accidentally spend the money on other things.

While you might be tempted to invest your emergency fund to make it grow faster, it’s important to make sure you have easy access to your money, which isn’t always possible with investments like non-redeemable GICs or mutual funds. Your best bet is to talk to your financial advisor about your best options.

If you are just getting started, take a look at our Springboard Savings Account. There is no minimum initial investment required and you can take advantage of pre-authorized contributions. This is a non-registered account, so your interest growth will be taxed every year.

Another simple way to save is a Tax Free Saver (TFSA) Account. This account is essentially a savings account with the tax sheltering benefits of a TFSA, where none of your interest growth in this account is taxed upon withdrawal.

If you have an emergency fund started and would like to earn higher interest on your money, consider our ATB High Interest Savings Account (HISA). You can hold your HISA in a registered account like a TFSA to shelter it from taxes, or a non-registered account which means you will have to pay taxes on your interest like a regular savings account.

All of these accounts offer the ability to withdraw your money at any time, while still allowing you to build your emergency fund steadily and securely.​​

ATB is here to help you save, prepare and be ready for any situation life may throw your way. 

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