Thursday, September 8, 2022
Learn how much money should be in an emergency fund and discover practical tips to build your savings steadily and cover unexpected expenses with advice from BDO Licensed Insolvency Trustee, Paul Ihnatiuk.
We’re living in a time of economic uncertainty. Tariffs, a high cost of living, and unaffordable housing are just some of the reasons many of us are struggling to save. Yet, these all prove that having an emergency fund matters. It gives you the ability to prepare for the worst and handle unexpected challenges.
An emergency fund acts as a safety net. It helps protect you from whatever financial disaster life throws your way. Without it you may be forced to rely on credit and fall into debt when the unexpected happens.
The big question is, “How much money should I save in an emergency fund?” We spoke to BDO Licensed Insolvency Trustee Paul Ihnatiuk to find out all the key details about emergency funds.
Don’t have an emergency fund? You’re not alone. A quarter of Canadians would be unable to cover an unexpected expense of $500, according to a Statistics Canada poll from 2023.
According to Licensed Insolvency Trustee Paul Ihnatiuk, the lack of a safety net is exactly what pushes many people into deeper financial trouble.
“Without an emergency fund, a life-changing event forces people to turn to credit cards or even payday loans. Payday loans are definitely getting worse, I’m seeing people with multiple payday loans because they’re just falling further and further behind.”
More recently, 48% told an RBC poll they don’t believe they’ll ever be able to get ahead financially.
That same poll also found that 47% of Canadians are living paycheck-to-paycheck.
A further 60% said they worry they don't have enough money to cover unexpected expenses today.
Paul explains it’s becoming harder for households to stretch their budgets.
“Pretty much everyone I meet with mentions the cost of living and how unaffordable things have become,” he says. “There’s sticker shock at the grocery store for basics - meat, fruit, canned goods - and even the sale items aren’t much of a deal anymore.”
There are signs this may be reaching a breaking point: in the summer of 2025, 27% of Canadians told TransUnion, one of the nation’s largest credit bureaus, that they couldn’t pay all their bills.
Paul says job loss, which is becoming more common as economic uncertainty rises, is one of the biggest reasons people reach this point.
“As the economy struggles, more people are getting laid off, and without that emergency fund you can find yourself in dire straits really quickly. Employment insurance can take weeks to arrive, and while people wait to be approved, they often end up turning to credit cards unless they have some savings set aside.”
An emergency fund is meant to provide relief when you face an unexpected expense. A car repair, replacing a major appliance, or a sudden reduction in your work hours can set you back and throw off your entire budget.
Licensed Insolvency Trustee Paul Ihnatiuk says these “unexpected” moments are exactly when people get into trouble.
“The unexpected always causes the most financial strain,” he explains. “Without an emergency fund, a life-changing event often forces people to turn to credit cards or even payday loans.”
An emergency fund allows you to handle these types of challenges without going into debt. You can avoid turning to credit cards or other loans by using money you’ve already set aside instead.
Paul says he’s seeing the consequences of not having any emergency savings firsthand.
“What usually happens is one unexpected expense hits, and because there’s no cushion, everything else starts to unravel. People juggle bills, rely on credit, and before they know it, they’re in a cycle that’s really hard to break out of.”
It's particularly a good idea to have one when faced with challenging economic times like we have now.
It gives you a safety net should the worst happen.
The Financial Consumer Agency of Canada recommends that you save enough money to cover three to six months of regular expenses. You can also aim to save three to six months of your income instead if that’s easier to do.
This means saving enough to cover your rent/mortgage, groceries, utilities, transportation, and other normal costs you have for that period.
Paul says this target can feel overwhelming at first, but adds, “it’s definitely feasible to build an emergency fund even if you start small. You don’t need to come up with thousands of dollars right away. You just have to work it into your budget, even if it’s just $25 at a time to start.”
Saving for this length of time is designed to give you some breathing room should you lose your job or suffer a medical emergency that leaves you unable to work for an extended period.
How long you should save for may also depend on your situation.
If you have a stable job and strong job security, you may not need to save as much as someone who works freelance or contract jobs. If you’re a single parent, you’ll likely need to try to save more than those in a two-income household.
Obviously the more you save, the better off you’ll be regardless.
Saving for an emergency fund doesn’t mean putting thousands of dollars aside at a time or making major lifestyle changes. It can be done over time with consistent contributions that don’t strain your budget.
Putting away even just $25 from every paycheck can make a difference. There’s no need to take large chunks of your earnings and set them aside at a time. You can find a number that works for you and allows you to continue your regular activities.
Paul Ihnatiuk notes, that it’s better to save based off your income than your expenses.
“Expenses go up and down all the time, but your income is usually the most stable number in your budget. Using that as your baseline makes it easier.”
One of the easiest ways to begin your emergency fund is to set up a separate account for it. You can then schedule transfers to it for the same day you receive your paycheck. This treats your emergency fund contributions like any other essential bill and removes the temptation to spend the money elsewhere.
Get a large tax refund? Receive a bonus at work? Get a bit more money than you expected as a gift?
Take a portion of these and add it to your emergency fund. This is an easy way to boost the amount you save faster.
We all likely have one thing we spend money on that we could do without. Order in once a week? Doing it every other week instead could save you a bunch of money.
Make your morning cup of coffee at home instead of grabbing it on the way to work. Consider packing your lunch each day instead of buying it. Consider cancelling any paid subscriptions you rarely use. Even using a reusable cloth instead of buying expensive paper towels can add up. The options are limitless!
Take whatever money you manage to save from cutting something, even if it’s just $5 a week, and add that to your emergency fund contributions. It goes a long way.
We know that for some people, saving for an emergency fund feels out of reach. If you find yourself using credit cards to cover bills, skipping payments, or falling further behind each month, you’re not alone.
Our Licensed Insolvency Trustees, like Paul Ihnatiuk, help people take back control of their money every day.
“We can help people look at their entire financial situation, reduce their debt, and put together a plan that actually gives them breathing room again,” says Paul.
Our Trustees understand how overwhelming it can feel when debt keeps piling up. That’s why our first consultation is always free. You can sit down with one of our trustees, talk openly about your situation, and explore your options.
Trustees like Paul Ihnatiuk do not judge. Instead, they listen, answer your questions, and guide you through proven solutions that can reduce debt and relieve financial stress. We’ll walk you through every step to become debt-free.
Thursday, September 8, 2022
Learn how much money should be in an emergency fund and discover practical tips to build your savings steadily and cover unexpected expenses with advice from BDO Licensed Insolvency Trustee, Paul Ihnatiuk.
