Apply For a MortgagePublished: May 12th, 2010 • Last Updated: January 7th, 2021
Author: Ross Taylor on AskRoss.ca
You need to have an emergency fund before you start planning to go on vacation!
Day to day, in credit counselling, we preach the importance of learning how to save and why it is so important. This article in the Globe by Angela Self makes the point very well.
“If you had to finance an unexpected expense of $5,000, could you? One-quarter of us could not, even with the aid of a credit card or line of credit. One in 10 of us would even have difficulty handling an unexpected expense of $500, according to a new report by the Certified General Accountants Association of Canada.
One-third of non-retired Canadians don’t commit resources to any type of regular savings – not even for retirement. This makes surprise expenses hard to handle. But here’s the scarier part: Saving for vacation and entertainment get higher priority among younger households, compared with saving for education or home down payment. If you’ve got a Hawaii fund before an emergency fund, you’ve got a problem – or you’re likely to have one soon.
Starting an emergency fund can be as simple as depositing $100 or less into a high-interest savings account. You can quickly find one that’s right for you at the Financial Consumer Agency of Canada’s site (fcac-acfc.gc.ca/eng/consumers/ITools/CoB/default.asp).
After the account is set up, make it a habit to stash small amounts or unexpected gains into your account instead of your wallet. If you’re carrying debt, apply the same approach to your credit cards or loans to ensure room for unforeseen emergencies. Setting up regular automatic withdrawals is an even easier approach. Once you’ve reached your savings comfort zone, then you can start planning for your next Hawaiian luau.”
Angela Self is one of the founders of the Smart Cookies money group. Read her weekly column on managing debt and saving money at globeinvestor.com.
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Ross Taylor
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Ross Taylor is recognized by his peers as one of Canada's pre-eminent difficult mortgage specialists. His ASKROSS blog and column in Canadian Mortgage Trends are focused on the intersection between mortgage financing and personal credit.
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