Saving for a Rainy Day
No matter how carefully we plan, there’s no guarantee life will unfold the way we expect. Job loss, illness, loss of a spouse or partner — some things are simply beyond our control.
Be prepared for the unexpected by creating a separate fund for emergencies.
Here are three guidelines you can follow to set up your own emergency fund:
- Calculate how big your savings ‘cushion’ should be. A common rule of thumb is to maintain a cushion of at least three months’ worth of living expenses. So if your household and day-to-day living expenses total $1,500 USD a month, you should maintain a cushion of $4,500 in your emergency fund.
- Don’t touch it. An emergency fund is for emergencies, not luxuries. Think of your emergency fund as a fire extinguisher: the only reason to use it is if there’s a fire.
- Keep it liquid. An emergency fund should be held in a high-interest-rate Savings Account or cashable investment that will earn a reasonable rate of return.
Now, how do you set aside enough to build an emergency fund? Scotiabank’s Automatic Savings Plan (ASP) can help. The ASP automatically makes payments to your Savings Account at set intervals, typically the same day you receive your paycheque, so you don’t even notice the money’s gone.
We can help set up your ASP and calculate how much you should put aside, so that you can start building your rainy day fund sooner rather than later.