Building an emergency fund

We’ve talked previously about budgeting. An important thing to include in your budget is an emergency fund. Saving for an emergency before it happens is one way to achieve financial wellness.

Before I started paying off my debts, I saved my money until I had enough for a small emergency fund of about $1000. I have this money tucked away so I can pay cash, instead of using credit, if something unexpected happens. 

Having an emergency fund is the most basic and essential tool for staying out of debt. Financial experts recommend saving enough to cover your expenses for three to six months. 

I decided to try and shoot for a three-month emergency fund since it seemed more attainable. I used my budget to calculate how much I would need to save. 

Creating an emergency fund, while paying off debt, was daunting, but I quickly learned some tricks for growing my savings, which included:

• setting-up a savings account that isn’t easily accessible from my regular chequing account;
• saving unexpected funds, such as tax refunds, gift money or overtime pay;
• because I’m paid bi-weekly, there are two months of the year when I receive three paycheques. In those months I will attempt to have one pay cheque allocated directly to my savings account;
• making savings automatic – I set up automatic transfers to my savings account for the day after I am paid each pay period; and
• if I receive a pay increase, I will continue living on my existing budget as if I were still earning the lower salary.