Scary financial statistics or just scare tactics?
An article I read highlighted a survey released by the Bank of Montreal recently that found 54% of Canadians have more than three months of savings available, while 49 per cent “have access to” more than $5,000, if needed. This implies emergency funds across Canada are moderately established. In the same article, of the 1,000 Canadians polled by Pollara:
- 66% of those polled said they feel ready to withstand a financial emergency this year yet 33% feel unprepared for any financial downturn;
- 19% of folks feeling unprepared said a financial emergency would deplete all their savings.
In another article I read this one conducted by Harris/Decima, respondents were asked how confident they were about being able to raise $2,000 within a month if needed. Amongst the 1,000+ Canadians interviewed:
- 55% said they were extremely or very confident they could raise the cash although 92% said they’d consider borrowing for the money.
- 26% said they couldn’t raise the money no matter what timeline they were given.
Readers, I am curious….where do you stand with emergency funds? Do you feel you need one? Do you borrow for emergencies?
Are these scary financial stats or just scare tactics from the financial industry and media?
Thanks for reading and sharing this article.
We don’t have an emergency savings yet. Well, I shouldn’t say that, we started this week and have 20.00 in it
We’re just in the process of figuring out a budget that will work for us and starting our emergency fund. Until we get our debt (minus the mortgage and car) paid off I’m aiming to have 1500.00 emergency fund. That would more than likely get us through any ”emergency”. Neither one of us is in a career that we could ‘lose’ for all intents and purposes. I work as a dental hygienist so if something did happen to my current employer I could start working fill-ins for varying offices within 48hrs until I found permanent work and if I had to stop due to injury or any malpractice, I have loads of specific insurance for just that.
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Thanks for stopping by and for your detailed comment. I think $1,500 EF is a good goal, and good on you guys. The hygienist job is a very secure one and kudos for seleccting a professional in demand. I hope you and the Mr. continue to stop by my site.
Always good to interact with fellow Canucks trying to meet their financial goals.
We don’t have an EF per se but do keep $2k and $1k in our personal and my business account so that we don’t have any banking fees – a source of quick cash if need be. In a true emergency I’d borrow from the LOC as that is one debt that doesn’t incur compound interest and isn’t payable on demand. Although I’d have to think carefully before incurring non-deductible debt of any kind.
We recently paid our car off in 3 years using our dividend stream after taking the 0% financing option so I guess that would be a good source of emergency income but given the length of time we’ve held our equity portfolio, the LOC interest rate of 3% is far lower than our overall dividend yield so borrowing would be the better option.
Hey John,
Long time no chat?! I like what you said, think carefully before incurring non-deductible debt. We also have a 0% financiing on our car, it totally makes sense to do so if you’re buying new.
How is your dividend portfolio coming along?
We had quite a healthy savings account but having to replace the car ( expensive repairs or drain the bank account buying a new car cash) and then we had a very large bill come due at the same time pretty much did in our savings.
The good news is our trip of a life time coming up at Christmas is mostly paid for, just a bit of spending money.
Our savings will grow back pretty quickly but still!!!
Where are you going for a trip of a lifetime? Do tell! Thanks for your comment.
Curious Rob, what do you consider healthly savings? A few K? I think anything >$2 K is very good for most folks. I consider myself rather conservative. Do you tell me where you trip of a lifetime is??
I definitely have money set aside for emergencies, and would be able to cover a couple years of living expenses if needed. The only frustrating thing is receiving notices in the mail letting you know that they are, once again, cutting their interest rates on the savings accounts!
Having a cushion definitely helps me sleep easier at night, and I, fortunately, have not experienced an emergency situation yet, so I am not sure if I would be comfortable borrowing to cover it. Right now, I definitely prefer an EF rather than borrowing in case something happens.
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A couple of years? Wow. Yeah, I hate those letters. This low interest savings environment is killer the saver in all of us.
Our EF target is $10K, and we’re close to it. Hopefully we’ll hit that goal in early 2013. Then again, we have a trip planned to Latin America so we gotta live too!
Vicky, you seem to have your financial act together, which is awesome to read about. Thanks for the comment.
Wow that’s amazing that so many Canadians wouldn’t be able to scrape together $2k. I really wonder what those people would do if faced with a real emergency. Personally I don’t keep a true emergency fund available at all times, but I do have plenty of options if I did need money. Plus my affiliate income from my websites is always a month behind. So I can at least count on that money to keep coming in. Worst case scenario I’d take money out from my line of credit or get a 0% balance transfer credit card.
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Yeah, a stunning stat I thought for Canadians as well. Affiliate income is a good thing. How many websites do you own now?
We treat our TFSAs as our emergency fund. We don’t re-invest the dividends until the following years contribution. Through the year if we need extra income we just use the dividends and can re-contribute them the following year when things are better.
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That seems reasonable. I know we are trying to keep an EF of about $10,000 which is a bit more than most I know but it helps us sleep at night.
Our TFSAs are investment accounts and I don’t want to use them to sell any stocks in an emergency.
We like to keep at least a years worth of expenses in our Emergency Savings as that is what helps us sleep better at night. Many people I have talked to don’t even put away 10% of their earning towards an emergency but many realize that it is a concern as we can’t always keep relying on a credit card or line of credit. Cheers Mr.CBB
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A years worth of expenses is amazing, well done. I don’t think my wife and I will have that.
Our savings rate is close to 10% each year, and would be higher than that if you include our DB and DC pensions from work. After the EF is well established, we’ll be able to really focus on debt payments and building our investment portfolio. Hopefully dividend income of $7,000 per year in 2013.
I was told to pay off my mortgage faster, so I did. I kept only few for any unforeseen situations. My plan was -then and now – to draw money using credit if I need as I was told to pay off my mortgage.
Now what is wrong with that? Why did I get a mortgage or why do I have credti card?
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Smart move on paying off the mortgage, fast. Well done. We’ve got 9 more years to go…
Do you use your credit card or LOC for emeregencies?
I’m living on emergency savings as we speak. My bf lost his job and still hasn’t found one. Although we still have my income, it’s going in the negative balance every so slowly. We’re not certain of what’s going to happen and what to do if and when it all runs out… quite depressed about it recently
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Very sorry to hear about that Veronica. Hopefully things will work out for you soon. I know some folks who lost their jobs as well, they had a rough go of it for many weeks but after they figured out how to cut back, they made it through after they were employed again.
Maybe it’s a way for banks to convince people to put more money into their savings accounts
. I’ve heard about the Harris/Decima study. Pretty interesting. But some of the numbers are a little misleading. If someone had to raise $2000 for the deductible to fix their car after an accident, what are their choices? Sell their furniture, ask their family/friends, do something illegal, or do not pay. So it’s not surprising to me that 92% said they would consider going into debt, why would someone not consider all their options? Haven’t seen the first survey though. Happy to see most Canadians have a decent cushion to fall back on in case of bad times. But I’m not in that group 
. I don’t have an emergency fund and have all my money tied up in stocks and real estate. I have never had to deal with an emergency situation in my life yet so I’ve been lucky so far 
I have no problem borrowing for unexpected expenses.
Not surprising that so many folks would go into debt for $2,000 but $2K doesn’t last very long. A month+ of mortgage payments for us. Kinda scary when you think about it. Personally, I hate borrowing for expenses. I figure that’s the worst time you want to borrow money, when you’re already stressed about something. That could be just me though…
Thanks for your comment, and continued luck for those unplanned expenses!