Author Topic: Any suggestions concerning my emergency fund? (to Canadians)  (Read 1419 times)

ransom132

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Any suggestions concerning my emergency fund? (to Canadians)
« on: February 13, 2017, 02:05:53 PM »
Ok, so I currently have around 3,5K$ in EF, which is 3 months worth of expenses sitting in my high interest account which I am fine with. My goal is to have 6 months worth of expenses as my EF, but my intentions is to put the other half in an investment account, something with low risk, but that will grow over time (I don't expect 10% returns and stuff like that, but a modest 3-5% on average). Now, I rarely touch my EF except on a few occasions where my parents will ask me to help them out (which is about once or twice a year) and thankfully they were never big amounts (except once when i paid for their roof which needed immediate repairs)...if it weren't for my parents, I would probably be like MMM and have no EF, but because they are cash strapped, that is why I prefer keeping 6 months of EF. Now back to my original question, I am with Questrade, is there an ETF or something out there any of you recommend that I should invest my second half portion of my EF or should I simply keep stashing that money in my high interest account or maybe the third option is I don't keep my EF in my high interest account and simply just invest my money and when the time comes that I need my EF, I would simply withdraw from my TFSA by selling any of my ETF that is generating profit (I invest with the Canadian couch potato way)?
« Last Edit: February 13, 2017, 02:11:48 PM by ransom132 »

Prairie Stash

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Re: Any suggestions concerning my emergency fund? (to Canadians)
« Reply #1 on: February 13, 2017, 03:14:35 PM »
$3.5 isn't very large for some people. How long would it take to replace it? How quick are they about repaying usually? When you said it 6 months it implies you spend $700/month, I assume you have a hefty savings rate spending so little.

I skip the EF by having a large credit card for emergency purchases. Then I can pay it off with my line of credit (lower interest rate). Then I pay it back over a few months by diverting my savings to it. Credit lines are free, its a good insurance policy to have one set up just to smooth things out if necessary. I haven't used mine in years, just like any insurance you never want to use it.

ransom132

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Re: Any suggestions concerning my emergency fund? (to Canadians)
« Reply #2 on: February 13, 2017, 03:28:21 PM »
$3.5 isn't very large for some people. How long would it take to replace it? How quick are they about repaying usually? When you said it 6 months it implies you spend $700/month, I assume you have a hefty savings rate spending so little.

I skip the EF by having a large credit card for emergency purchases. Then I can pay it off with my line of credit (lower interest rate). Then I pay it back over a few months by diverting my savings to it. Credit lines are free, its a good insurance policy to have one set up just to smooth things out if necessary. I haven't used mine in years, just like any insurance you never want to use it.
I meant to say that my necessary expenses is around 1100$ to live (meaning I pay just the basics, nothing more)...I don't own a car, I don't own a house, so my risk are very low and I keep my expenses low too. I do have a credit line, my intentions is that instead of putting 200 something dollars in my savings account, I would just put it with my current investments in my TFSA (I have 5 ETF's in them, the old version of Canadian Couch Potato consisting of VAB, VCN, VXC and the new new ETF's with XAW and ZAG). This would boost my investments from around 400$ per month to 600$ considering that my EF would go towards that instead. I think it makes more sense and if I get hit with an emergency fund, I'll do like you say and put it on my credit line. If it ever gets to the point that my credit line goes above 3 or 4K$, then I can always sell my best performing ETF's to cover those expenses, last thing I want is to be stuck paying for 4-5 months + interest.

Retire-Canada

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Re: Any suggestions concerning my emergency fund? (to Canadians)
« Reply #3 on: February 13, 2017, 06:49:22 PM »
So if you have $3.5K in a savings account and a line of credit with a low risk and low cost lifestyle just invest the rest. You don't need more as your emergency fund. If the shit really hit the fan you'd sell your investments, but based on what you are saying that seems pretty unlikely.

ransom132

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Re: Any suggestions concerning my emergency fund? (to Canadians)
« Reply #4 on: February 14, 2017, 04:50:00 PM »
Awesome, thanks for your input. :)