The Importance Of Emergency Funds

No matter how much you plan out your finances, life always throws curve balls. Engines die, hot water tanks burst and faulty parking garage doors smash your windshield *sigh*. That's why it's very important to set aside funds every month into an emergency fund. It could be $50 a month for a single person and increase from there depending on the size of your family and depending on your luck. Some people just don't get a break.

How My Emergency Fund Works

My wife and I put $100 away a month into a simple savings account to keep an emergency bubble just in case. Some people get a case of "the spends" when they see money stockpiled in their savings account. I on the other hand have a problem seeing a large sum of money not paying down my Mortgage or any debt we have. I remember the second year of TFSA when I took our $10,000 bubble and transferred it into a tax free trading account and purchased 200 shares of Enbridge. My wife was very concerned and to be honest I was a little worried as well, but a year and a half later my TFSA contribution is worth over $13,000 and pays me a 99% guaranteed $400 a year in tax free money. As my contribution room grows so will my dividends and with that, my peace of mind.

I try and save three months of expenses in an emergency savings account in case of job loss or sickness. When I start going over that limit I started putting that $100 a month towards other things like TFSA, the house maintenance account, or special purchases. I've been told many times by my wife that a samurai sword does not qualify as a special purchase, but I beg to differ.
 

Need A Good Night's Sleep?

One thing I've learned since leaving the nest is that it's a great feeling to pay all your bills and have a positive bank statement. My wife slowly learned this since leaving University and now she aims to keep her balance above $500 each month. Now I know not everyone has that luxury, but with the right attitude anyone can save at least a little amount of money every month. If you can't then you are not living within your means. Back in the early 1900's people made enough money to put food on the table, clothes on their backs, put a roof over their heads and were still able to save a little bit of their money. Nowadays people have to buy big houses, wear designer labels and eat out at expensive restaurants and they have to carry a balance on their credit cards to do it . Am I the only one who sees this as a problem?

Whether you make a lot or a little, an emergency fund can turn an "oh no!" into an "oh well". If you have a hard time saving money, you just haven't had a big enough financial scare. Kick yourself in the pants and start saving small amounts of money for an emergency fund today. Your future self will thank you.

Do you have an Emergency Fund?