How Much Money Should I Save for a Rainy Day?

As we near the end of a year that could rightfully be described as a rollercoaster, it’s natural to look back on what’s gone well and what’s caused us frustration or distress. If your financial situation has been challenging throughout 2020, you’re certainly not alone. This “rainy day” we’ve all found ourselves in has now lasted more than seven months, and the majority of Canadians have felt some kind of a financial impact. When you feel the weight of the situation you might find yourself in, please remember that many other people are going through the same journey and one day, you’ll be on the other side of it. (That’s something to look forward to!)

An emergency fund can be a massive help in times of unexpected income loss or other hardship. We’re still learning from the COVID-19 pandemic, but it’s never too late to recover from recent setbacks and set ourselves up for future successes. Having a rainy day fund isn’t just about building wealth; it’s about protecting yourself from incurring unnecessary debt when large or unexpected expenses arise. Here are some recommendations on assessing your needs, building your emergency savings fund and getting ready for the next rainy day.

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Why do I need to save for a financial emergency?

Well, if this year has taught us anything, it’s that anything can (and will) happen. The majority of Canadians live paycheque to paycheque, which means that purchasing a set of new snow tires or replacing your dishwasher can pose a significant financial challenge. And, if you suffer from income loss, it can even be a struggle to pay your most basic living expenses. Even the most budget-conscious individuals cannot predict something like long-term income loss due to a global pandemic.

Even in these uncharted waters there are ways to stay afloat. If you need access to funds immediately, consider a personal loan. And if you’re able to carry your current expenses but want to plan for potential challenges in the future, it’s a great time to prioritize building an emergency savings fund. It won’t necessarily cover all unexpected costs in your future, but every bit helps. A small weekly or monthly contribution involves minimal sacrifice to your current lifestyle and can mean huge relief down the road.

How much should I save? 

Let’s talk numbers—or at least, give you a framework to determine what numbers work for you. The specific figure you should aim to save in your emergency fund is not universal because everyone’s income and expenses are unique, but generally speaking, saving enough money to cover six months worth of fixed and necessary expenses is ideal. This would include all rent or mortgage payments, bills, groceries, transportation costs and other living expenses. For example, if your monthly expenses total $3500, you’d want to save approximately $21,000. And yes, that’s a big number! Would it make a solid safety net for you and/or your family? Absolutely. Is it realistic for most Canadians to have this much money set aside in savings? Absolutely not.

The average Canadian lives paycheque to paycheque and carries some debt. Saving six months worth of your personal expenses in a rainy day fund may be ideal, but it’s better to set a realistic goal based on your income and budget. This will help you avoid feeling discouraged.

Set a goal that is both ambitious and yet attainable. You might want to manage your own expectations by aiming to save enough money to cover three or even just one months worth of expenses as a starting point. Even if you can only afford to make a very small contribution each month, remember that untouched savings should always grow. When left alone, your account balance will increase in both principal and interest over time.

I’m committed to saving money in an emergency fund. How do I do it?

It’s important to take a long-term view when building savings because unless you come into a financial windfall, it won’t happen overnight. Instead, focus on slow, steady, reasonable growth that doesn’t create financial strain. Building your rainy day fund will take dedication and patience. This is not a situation with instant gratification but believe us, it’s worth it in the end!


Begin by setting up a separate bank account that’s dedicated to financial emergencies. Ideally, this will be a high interest savings account or another option with minimal service fees. A TFSA is a great option for your new savings vessel because it’s simple, separate and relatively easy to access in an emergency. Be sure that you are not putting money into an account that incurs tax penalties upon withdrawal (an RRSP, for example) as those fees will seriously eat into your savings.

Once you’ve got a dedicated emergency savings account up and running, set an automatic transfer from your everyday bank account to this new fund. This transfer should coincide with your regular pay day or another time when cash flow is more abundant than usual.

When should I use my rainy day fund?

An emergency fund should be used for true emergencies only. For example, use it for a down payment on a vehicle because yours has died and you need it to get to work each day, or for paying your rent because you’ve lost income. Do not dip into your emergency fund for “wants” like a vacation or discretionary spending. And if you have to withdraw money from your rainy day fund, make a point to rebuild those savings as quickly as possible.

Looking for personalized financial advice or access to credit? We are here to help.

Sometimes, it takes a little one-on-one support to get your finances in order. If you’d like to speak to a member of the easyfinancial team, please reach out to your local easyfinancial branch or easyhome branch. You can also give us a call at 1-888-502-3279. Our team is committed to working with you to help find solutions that best fit your income, needs and goals. No matter what your obstacles and vision for the future are, we are here to help.

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