Key takeaways
- The Financial Consumer Agency of Canada suggests saving 3 to 6 months of regular expenses
- Count only essentials: housing, food, utilities, transport, insurance and minimum debt payments
- Newcomers without a stable job may want more than 6 months
- Keep it in a separate savings account you can reach quickly, with no withdrawal penalty
- Start small: an automatic transfer every payday works
How much should an emergency fund be?
The Financial Consumer Agency of Canada (FCAC) suggests saving 3 to 6 months of your regular expenses (or 3 to 6 months of income). The calculator counts essential costs only, because in an emergency you would cut extras such as eating out and subscriptions.
It then picks a target based on how secure your income is:
- 3 months: stable salary and two incomes in the household
- 4 months: stable salary but one income
- 6 months: new job, probation, hourly, commission or gig work
- 9 months: no job yet. This is above FCAC’s range on purpose: a job search in a new country can take longer.
What counts as an emergency?
FCAC describes emergencies as unexpected costs: a job loss, a car repair, a pet emergency or a health problem that stops you working. Planned costs such as winter tires, school supplies or holidays are not emergencies. Budget for those separately with the newcomer budget calculator.
Where to keep your emergency fund
FCAC suggests a savings account that is separate from your daily account, has no or low fees, lets you withdraw without penalty, and pays interest. In practice that usually means a high-interest savings account. A TFSA savings account works too: interest is tax-free and you can withdraw any time (the room comes back on January 1 of the next year).
Avoid locking it all in a GIC that you cannot cash early. Compare rates on our savings account rates page.
How to build your fund faster
- Automate it. FCAC suggests a regular transfer from each paycheque. Set it for payday so you do not see the money.
- Start small. Even $20 a week adds up to over $1,000 in a year.
- Save windfalls. Put tax refunds, benefit back-payments, bonuses and raises into the fund.
- Cut one cost. A cheaper phone plan or transit pass can fund your savings.
Worked example
Ana and her family just arrived in Toronto. Their essentials are $3,310 a month, she is in a new job on probation, and she is the only earner. Her target is 6 months: $19,860. She has $3,000 set aside, so she needs $16,860 more. At $500 a month that takes 34 months. If she can save $800 a month, it takes 22 months.
Newcomers: your settlement money is your first emergency fund
Many newcomers arrive with savings, often the proof-of-funds amount. Treat part of it as your emergency fund before you spend it on furniture or a car. Until you have a job, these savings pay your rent. Our guide to an emergency fund for newcomers covers this in more detail, and the first 90 days budget shows typical early costs.
If you carry credit card debt, compare the interest you pay with what savings earn: see the credit card payoff calculator. A small buffer first, then paying down high-interest debt, is often the best order.