Life is full of surprises. Nobody saw the pandemic coming, and we were all taken by complete surprise when it hit us. You never know what could happen. There could be a natural disaster that could destroy your car or house. You or your partner could get so sick that you won’t be able to work. A lot of people were laid off during the pandemic. But it’s not just the big things. There could be little things too that can rack up your bill. If you blow a transmission, it could mean a $1,000 expense. This is something you might not have expected. Anything like that could send you over your budget and looking for some quick cash. It could make you vulnerable. You might find yourself with huge credit card debts, and it could take a long time to cover them. If you had an emergency fund, you wouldn’t be in this situation, would you?Emergency funds are amazing. You could start with anything you have, even if it’s a dollar, and build your own portfolio. You could grow your money with low fees easily.
What’s An Emergency Fund?
When things go south in your life, you’ll be able to use an emergency fund to help you out. It has to be easily accessible, which means you shouldn’t stuff it in a mattress, which many people do. Cash stashed in the mattress will be vulnerable to vermin, but also, inflation will make it worthless as time goes by. What you need is liquid cash. Liquid means you can get it at any time by either logging into an account and transferring it to your checking account or just walking in.
When Should You Start an Emergency Fund
What’s the best time to start an emergency fund? It’s right now. It would be best if you did not put off starting your emergency fund. Not even till tomorrow. You don’t know when something might happen. Your roof might cave in. You might get a pest infestation. And the best part is that you don’t have to start big. Stop worrying about thousands of dollars. Just do what you can. Once you start saving, it’ll grow up to be a large pile of cash, ready to be used when you need it. Just make sure that you don’t have any credit card debts. If you do, we suggest taking care of them before you take care of your emergency fund in Toronto.
What Is the Best Way to Start An Emergency Fund?
The best way to start your emergency fund is with whatever you’ve got. It could be a few dollars or thousands of dollars. How will you get thousands of dollars?Think about your personal tax returns. Maybe you’ll get returns from the money you overpaid to the CRA. You could also use the bonus instead of spending it on expensive shoes or a branded watch. But don’t wait for that to happen. The best way is to save small yet consistent. You have to take out $50 or $100 each month and put it in your savings account. It could even be smaller than that. Once you get used to it, you won’t even know that some of your salary is missing. You’ll just keep on putting it away.
How Much Do I Need in An Emergency Fund?
To answer this question, the recommendation from experts in an accounting firm is always to have between 3 and 6 months of your household income on hand. Given the current economic climate, a recent suggestion has been that 8-12 months may be a better idea. You’re probably in pretty good shape to weather most storms if you have six months of savings on hand. Nobody should be without at least three months’ worth of expenses. If you want to work with a professional accountant, do not hesitate to contact us. We can help you with your finances, bookkeeping, and taxes.