Emergency Fund

An emergency fund is money you keep easily accessible for the unexpected. Job loss, a car repair, a medical expense. The goal is to have enough cash on hand that you never have to sell investments or take on debt to handle a surprise.

How much to keep

A common guideline is three to six months of essential living expenses. If your rent, groceries, insurance, and other necessities add up to $3,000 a month, that means $9,000 to $18,000 set aside. The right amount depends on your situation. If you have a stable job and no dependents, three months might be enough. If your income is variable or you’re supporting a family, six months or more can provide peace of mind.

Where to keep it

The priority is liquidity, meaning you can access the money quickly without penalties or losses. A high-interest savings account (HISA) is the most common choice. Some people use short-term GICs, but these lock up your money for a set period, which somewhat defeats the purpose.

Your emergency fund doesn’t need to earn a great return. Its job is to be there when you need it.

Why it matters

Without an emergency fund, a sudden expense can force you to sell investments at a loss, rack up credit card debt, or withdraw from a registered account at a bad time. It’s not exciting, but it’s the foundation that lets you invest with confidence. Our guide on emergency funds and investing covers how to think about the balance between saving and investing.