6 Tips to Build Up Your Emergency Savings

As we continue to wade through a global pandemic, more and more of us are going through unexpected changes in our lives. Travellers have been stuck in foreign countries for months, exhausting their funds to survive in unfamiliar places. Preventative quarantines are mandating that people stay home when necessary, leading some to lose the income they may have earned in that time. And on top of all of this, hundreds of thousands of Canadians have been suddenly laid off, with many businesses barely managing to scrape by. 

These times are the rainy days for which emergency savings are absolutely necessary. 

What is Emergency Savings? 

Emergency savings are easily accessible funds that have been set aside as a safety net for when an unexpected expense arises. These expenses include, but are not limited to, an unexpected loss of income, your car breaking down, unexpected repairs to your home or health complications that require funds to cover services not provided by provincial or private health insurance. 

It is recommended that the amount you save is equivalent to at least 3-6 months of your regular expenses. This means that you should have enough saved up to cover rent/mortgage, food, transportation and bills for at least 3-6 months. With these back-up savings, you can avoid relying on your credit cards or high-cost loans and prevent yourself from falling deep into debt, helping you maintain financial control with peace of mind. 

But reaching this comfortable financial cushion is not always easy. For many, savings are not built overnight, and depending on your situation, it may take months or even years to reach your emergency savings goals. 

Here are 6 tips to help you get started on building your emergency savings:

1. Start small and stay consistent in how much you deposit in your savings. Make a weekly deposit of a small amount, whether it is $5, $25, or $50. Gradually increase the amount to help your money grow. 
2. Instead of spending tax refunds or work bonuses on non-essential items, consider placing these amounts into your emergency fund.
3. Make it a habit to set aside money by dropping extra change in a “Rainy Day” jar at home and setting reminders to do so in your calendar or phone. 
4. If it’s hard for you to remember, automate your savings. Many online and mobile banking platforms allow you to simply set it and forget it!
5. Cut down on any unnecessary expenses. Bring coffee from home or skip eating out for lunch or dinner. 
6. Take advantage of deals, coupons, price matching and special offers when shopping for everyday items such as groceries and essentials as well as large purchases.

Remember, setting aside emergency funds can take time, and the amount you should save is unique to yourself and your financial situation. Rest assured in knowing that having this safety net can be a step in the right direction of having confidence in your financial security since its purpose is to help protect yourself and your family in case something goes wrong.

If you are in financial troubles and are zakat eligible, consider apply for Zakat at https://nzfcanada.com/apply/