Emergency Fund – Your rainy day fund can take decades of hard work to build, and it can be wiped away in a single day when disaster strikes.
One catastrophe is all it takes. Next thing you know, you’ve drained your emergency fund and you are back at zero, building your savings from the ground up.
Unfortunately, another emergency can arrive before you manage to repay your fund. Here’s what you should do if bad luck strikes when your emergency fund is low.
What to Do if You Don’t Have Enough Savings?
Picture this: you suddenly have to pay out of pocket to fix a cracked tooth, or your car needs new brake pads and rotors, or your cat needs exploratory surgery to remove the rubber band she swallowed.
Without savings, an unexpected trip to the dentist or vet may only be possible with the help of credit. Credit cards and lines of credit provide safety nets in these urgent, unavoidable situations.
If you don’t have these safety nets already in your back pocket, you can visit a lender like Fora to learn more about online loans that may be available in an emergency. The online loans from Fora Credit are just one kind of line of credit, so be sure to comparison shop before you apply for anything.
Comparison shopping involves checking the rates and terms of individual lenders to see how they measure up. While you might not qualify for the most affordable online loans Canada has to offer, this step helps you find the best deal available to your financial profile.
Most People Would Have to Borrow in an Emergency
Relying on a credit card or line of credit isn’t unusual in this day and age. That’s according to the Canadian Chartered Professional Accountants (CPA), which conducted a survey in late 2022 to see how the nation was doing financially two years after the pandemic.
Their findings reveal 50% of Canadians can’t afford a $2,500 emergency expense. Of this group, 38% can’t come up with $1,000, and another 26% can’t drum up $500 without borrowing or selling something.
It may come as no surprise to learn that nearly half (45%) of Canadians surveyed by the CPA did admit to borrowing in 2022. Most did so through banks, but others asked family for help or refinanced their mortgages.
It’s Time to Restock Your Emergency Fund
Economists believe the worst of the pandemic is behind us, but 2023 doesn’t have a rosy forecast just yet. Trusted market watchers believe a recession may arrive in Canada before the year is out.
A well-stocked emergency fund can help you weather this possible downturn with greater confidence. Not only will you have savings to handle the unexpected, but you can dip into these funds if a recession causes you to lose hours at work — or worse, your job entirely.
On a more positive note, there’s never been a better time to focus on saving. With the central bank’s most recent rate hikes, the basic savings account offers a decent interest rate on your deposits.
You may snag an even higher rate by looking at online financial institutions or neo-banks. These branchless companies don’t have the typical overheads of Canada’s biggest banks and pass on the savings to their depositors. Several high-interest savings accounts (HISA) offer competitive rates as high as 5%.
With this bump, you might find it easier to grow your savings, so when the next disaster strikes, you don’t have to reach for your line of credit.
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