--- title: "Saving for a rainy day: How to start an emergency fund" date: 2024-11-29T13:23:00-05:00 author: Frank Fabiano canonical_url: "https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-saving-for-a-rainy-day-how-to-start-an-emergency-fund" section: Articles --- [ Back to the hub ](https://grantthorntonlimited.ca/en/debt-help-resources/articles) # Saving for a rainy day: How to start an emergency fund Frank Fabiano CPA, CIRP, Licensed Insolvency Trustee ![Person holding a yellow umbrella while walking down the street on a rainy day.](https://pr-assets.grantthorntonlimited.ca/craftcmsimages/Article-imagery/_articleHero/14479/rainy-fund-square-2.webp) Frank Fabiano CPA, CIRP, Licensed Insolvency Trustee We've all been told to save for a "rainy day", but many Canadians won’t have money left over at the end of today. In 2024, [66% of Canadians had to cut back on saving to cover the high cost of living](https://grantthorntonlimited.ca/en/debt-help-resources/articles/navigating-the-storm-how-canadians-are-handling-rising-debt). Two in five dipped into their emergency fund to cover everyday expenses. So, if that’s the reality, why should Canadian's set money aside for a rainy day when they’re still in the middle of the storm? ## **Why you need an emergency fund.** An emergency fund is money saved in an easily accessible bank account to help cover unexpected expenses. This money can be used to cover monthly living costs if you have to take time off work because of [job loss](https://grantthorntonlimited.ca/en/debt-help-resources/articles/a-guide-to-managing-your-finances-for-the-newly-unemployed), injury, or illness. Emergency funds can also cover repairs to your home or car, unexpected medical or [veterinary expenses](https://grantthorntonlimited.ca/en/debt-help-resources/articles/the-real-cost-of-pet-parenthood-how-to-avoid-the-financial-doghouse), legal fees, increased insurance payments, loss due to natural disasters, and so much more. Emergency funds are also a great source of available income if you don’t have access to credit. After someone files a [bankruptcy](https://grantthorntonlimited.ca/en/bankruptcy/what-is-bankruptcy) or [consumer proposal](https://grantthorntonlimited.ca/en/consumer-proposal/what-is-a-consumer-proposal), it may be difficult for them to receive credit cards or lines of credit from financial institutions. Having some savings in an emergency fund can help cover any unexpected costs when you can’t rely on credit. ## **How much should you save?** The rule of thumb for an emergency fund is to set aside enough money to cover three to six months’ worth of expenses. Generally, people underestimate their monthly expenses and save too little. To calculate your living expenses, check out our [budgeting guide](https://grantthorntonlimited.ca/en/debt-help-resources/articles/how-to-make-a-basic-budget-and-stick-to-it). Once you've calculated your minimum monthly expenses, look at your current savings and financial goals to see how you might add to your “Rainy Day” fund. ## **Start saving small.** An emergency fund doesn't happen overnight. Set up a savings plan and start with a small amount of money. Even $10 to $20 a week can make a difference in the long term. Consistency is key to an emergency fund. Automatic deposits can make sure your setting money aside. You can even set them up on the same days you get paid, so it feels more like paying for a benefit, like health insurance premiums, then taking away spendable money. If you're struggling to find room to save or are living paycheque to paycheque, see if there is anywhere you can cut back. Giving up your morning takeout coffee, bringing lunch to work, or cancelling a subscription can free up just enough to get you started. For example, the average Canadian works 251 days out of the year. If you stopped buying daily $5 takeout coffees, that could be $1,255 a year to put towards your emergency fund! ## **Make your money accessible.** The key to any emergency fund is it needs to be easily accessible. Unexpected expenses are just that: unexpected. While investing your money into stocks, mutual funds, or an RRSP may provide bigger returns, it can take time to withdraw and can even carry tax penalties. When choosing the best savings account for your emergency fund it’s important to remember the following: - Make sure it is a separate account from your day-to-day savings or checking account. - Look for an account that has no or low transaction fees. - Find an account that offers earned interest. You may be able to earn a little bit on top of the amount you put away. - Ensure you can make withdrawals from the account without any penalties. - Choose an account that has same-day withdrawals or will transfer your money within a few days. ## **Set a savings goal.** Even though an emergency fund is important, make sure to balance saving with your other financial goals. It's easy to get caught up preparing for the unknown, but it's important to not lose sight of the present. Don't forget other financial goals like paying down debt, saving for retirement, or life experiences like booking special a vacation, or buying a car or home. Emergency funds take time, planning and discipline. [Make SMART goals](https://grantthorntonlimited.ca/en/debt-help-resources/articles/setting-financial-goals-7-realistic-examples) to set realistic expectations for your financial future. ## **Prepare for setbacks.** An emergency fund is meant to be used. That means, you might have to pull funds for an unexpected expense before you've reached your savings goal. Don't be discouraged! Without those savings, you might have relied on debt and taken on interest rather than being able to pay up front. As frustrating as it can be, the best path forward is to start saving again. Sometimes, it doesn't matter how much we save or want to save. Life is unpredictable. If you find yourself overwhelmed by debt, we're here to help. Our team of debt solutions professionals can review your finances with you during a free, no-judgment consultation, and make personalized recommendations to help you take back control of your financial future. [Book your consultation online](https://grantthorntonlimited.ca/en/get-in-touch/contact-us) or by phone at 1-844-4GT-DEBT. About the Author Frank Fabiano CPA, CIRP, Licensed Insolvency Trustee ## Latest articles [ ![](https://pr-assets.grantthorntonlimited.ca/craftcmsimages/Article-imagery/_articleThumbListSmall/67684/assets-CP-square.webp) ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-what-happens-to-your-assets-in-a-consumer-proposal) [What happens to your assets in a consumer proposal? ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-what-happens-to-your-assets-in-a-consumer-proposal) [ Read this article ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-what-happens-to-your-assets-in-a-consumer-proposal) [ ![](https://pr-assets.grantthorntonlimited.ca/craftcmsimages/Article-imagery/_articleThumbListSmall/65155/recreational-vehicle-square.webp) ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-what-happens-to-an-rv-boat-or-atv-loan-if-you-file-a-consumer-proposal-or-bankruptcy-in-canada) [### What happens to an RV, boat, or ATV loan if you file a consumer proposal or bankruptcy in Canada? ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-what-happens-to-an-rv-boat-or-atv-loan-if-you-file-a-consumer-proposal-or-bankruptcy-in-canada) [ Read this article ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-what-happens-to-an-rv-boat-or-atv-loan-if-you-file-a-consumer-proposal-or-bankruptcy-in-canada) [ ![](https://pr-assets.grantthorntonlimited.ca/craftcmsimages/Article-imagery/_articleThumbListSmall/63555/influencer-survey.webp) ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-influenced-into-debt-how-social-media-impacts-canadians-finances) [### Influenced into debt: How social media impacts Canadians' finances ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-influenced-into-debt-how-social-media-impacts-canadians-finances) [ Read this article ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-influenced-into-debt-how-social-media-impacts-canadians-finances) ## Subscribe to our newsletter Get tips and tools to help manage your finances and live debt free. \*I agree to receive communications from Doane Grant Thornton. I understand that I can unsubscribe at any time. ## **Take the first step** to debt freedom Speak to one of our debt solutions professionals during a free, no-obligation consultation. [ Book a free consultation ](https://grantthorntonlimited.ca/en/get-in-touch/contact-us) ## Related articles ![](https://pr-assets.grantthorntonlimited.ca/craftcmsimages/Article-imagery/_articleThumbMedium/67684/assets-CP-square.webp) ### [What happens to your assets in a consumer proposal? ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-what-happens-to-your-assets-in-a-consumer-proposal) In most cases, a consumer proposal allows you to keep all of your assets while bankruptcy may require you to surrender certain non-exempt assets. 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[ Read this article ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-what-happens-to-an-rv-boat-or-atv-loan-if-you-file-a-consumer-proposal-or-bankruptcy-in-canada) ![A woman in scrubs sitting on a park bench looking at her phone, with imagery of social media likes and spending surrounding her.](https://pr-assets.grantthorntonlimited.ca/craftcmsimages/Article-imagery/_articleThumbMedium/63555/influencer-survey.webp) ### [ Influenced into debt: How social media impacts Canadians' finances ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-influenced-into-debt-how-social-media-impacts-canadians-finances) While social media may be free to use, the things it influences us to buy often come at a cost. As influencer marketing continues to grow, more Canadians are making purchases based on what they see online. 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