✔ A personal emergency loan can help you weather financial emergencies.
✔ During Covid-19, you may have access to new government benefits for extra help.
✔ An emergency fund can help you with future surprises.
The past year was tough on countless Canadians—and not just financially. But while the pandemic has continued to add stress to both our lives and livelihoods, nearly half a million recipients of the government’s Canada Emergency Response Benefit (CERB) faced the additional shock of learning they might have to repay the benefits they’d received.
As we’ve all experienced, scenarios like that are just the tip of the financial-emergency iceberg. Every day, Canadians face unexpected expenses that threaten their financial wellbeing, from owing money on taxes to discovering household emergencies that need immediate attention. But if you’re in that boat right now, help is available. These are the sure steps you can take to regain your financial foothold after an emergency.
Make an action plan
If an unexpected expense has popped up in your life, the best thing you can do to calm that stress and regain balance is to create a solid plan to deal with it.
The first step is to sort out the total cost of the situation you’re facing. From there, review your options for accessing those funds. Since not everyone has an emergency fund available, you may need to apply for a quick personal loan, even if you have bad credit or no credit history. If you choose that option, you’ll want to compare interest rates, but you should also look for flexible terms and a repayment schedule that will work with your household budget.
Withdrawing money from your TFSA and RRSP savings accounts is also an option that many Canadians use. For RRSPs, keep in mind that some accounts are locked-in and not accessible. And most importantly, be aware that a percentage of the money you withdraw will be held for taxes, and you’ll have to report the amount you take out as income on your next tax return. With TFSAs, you won’t have to pay a portion in taxes, but you might not be able to put the funds back in for a while if you don’t have enough contribution room available.
Most Canadians are already aware of the Canada Recovery Benefit (CRB) and Canada Recovery Sickness Benefit (CRSB) programs available through the government during the pandemic. But beyond those benefits, there is also some emergency help that not all Canadians know about. Some lenders are offering mortgage payment deferral, and limited provincial and territorial-level support is available as well. For example, Ontario residents can apply to Ontario Works for emergency assistance with food and shelter.
Prepare for future surprises
Once you’re on the other side of a financial emergency, don’t exhale just yet. You still need to create a plan and schedule to repay any loans or withdrawals you took out. Without that plan, you may quickly find yourself back in a stressful scenario. Even paying a small amount from each paycheque can help, especially if you made withdrawals from your long-term investments or retirement savings to cover the unexpected expense.
When you can, it’s a great idea to start saving for an emergency fund. Putting a little money aside now can help you weather unexpected financial challenges down the road, like a temporary job loss or a higher-than-expected tax bill. And not only will it ensure you have some cash on hand for future surprises, but you’ll sleep better at night knowing that another emergency won’t knock you off the path to financial health.
Depending on your budget, the easiest way to kick-start your emergency fund is to save a set amount each week or each month—and not touch that money until you really need it (as opposed to a savings account, which you might regularly access to pay for things like vacations or appliance upgrades).
So how much should you have in a rainy-day fund? Many experts recommend saving enough money for up to six months of living expenses. That means if your fixed and essential expenses like rent, food, and car payments total $2,500 a month, your goal would be to have $15,000 in your emergency fund. But the main takeaway here isn’t the exact amount you should be trying to save—it’s that having any amount of money set aside for emergencies can help with your peace of mind and overall financial wellness.
We’re here to help
If you’re facing financial challenges, arm yourself with the free knowledge in our goeasy academy. And if you need immediate help, please contact your easyfinancial branch or easyhome branch. You can also give us a call at 1-888-502-3279. We know that your situation is unique, and are committed to working with you to help you find a solution that will best fit your needs. After all, we’re here to help.