What do you do with your Emergency Fund

[ms_misfit]

I have about $20k saved in a TFSA as my emergency fund. I'm looking for suggestions as to what I should put it in. I don't want to lose the money if the markets go down but I would like to at least beat a high interest savings account as ideally I will not need to use the money. Any thoughts? I have some of it in VBAL right now but most of it is just sitting in cash.

[daverobev]

An emergency fund needs to be available to you within days. It needs to be cash or very close to cash. Cashable GICs perhaps.

The TFSA is where long term investments should go, along with an RRSP. Your EF should be earning you ~1% in a HISA or something - no need to tax shelter that.

If you can, swap so that investments are all in the TFSA and the cash isn't. Unless you have lots of spare TFSA room of course, in which case hey why not.

I like https://www.oaken.com/gic-rates/ as the rates are usually better than HISAs (see cashable GICs), but you may find better promo offers elsewhere.

[Mighty Eyebrows]

I would like to at least beat a high interest savings account as ideally I will not need to use the money.

Unfortunately, in the global low-rate environment, holding cash has a cost. Think of it as a fee for liquidity, which is sometimes necessary to pay. As wiser minds have said: for an emergency fund it is more about return of capital, not return on capital.

Also, I agree with the post above: Don't hold cash in your TFSA (unless you have too much space). The TFSA is your most precious investment shelter.

[thriftyc]

If you are early in your investing journey, I'd suggest an all equity ETF in your TFSA such as VEQT or XEQT, and max it out every year if you can.
It's going to be volatile being all equity but will give you the best opportunity for long term growth. Just keep contributing no matter what the market is doing. Keep an emergency fund in a high interest savings account, and try to limit that - use most of your money to max out investments over the long term if you can. Cash is being eaten away by inflation. And bonds are a drag on your growth - esp at this point in history as interest rates start to creep back up.

[Heckler]

I had a "little emergency" fund of ~5k cash in my HISA and held my "big emergency" fund of 21k in my TFSA for about 5 years in VSB short term bonds, where it made under 1k in gains and interest.  After I maxed out my TFSA in VCN on top of the 21k VSB, I started transitioning my emergency fund from TFSA by building up my HISA account to 21k, and then sold off the VSB in my TFSA to buy VCN so it can grow. 

TFSA should ideally be all stocks due to tax free capital gains, but your emergency fund should be cash, easily accessed.   Take steps to get there.

[sonofsven]

I have mine in an online savings account that pays a *staggering* .49%, I also move parts of it around doing bank bonuses, which gives you a little income and the safety of cash.

[thriftyc]

I have mine in an online savings account that pays a *staggering* .49%, I also move parts of it around doing bank bonuses, which gives you a little income and the safety of cash.

I park my cash at EQ bank, pays over 1%. Still below inflation, but good for short term savings.

[FLBiker]

I use EQ bank as well.

[Freedomin5]

I use the minimum balance in my bank account as my EF. I have to keep a minimum of $5k in there anyway to avoid the monthly fee, so if I have an emergency, I can spend the $5k and pay $29.95 that month to TD Bank for dipping below my minimum balance. I also have a small HELOC that can be used as an EF. And my last option is to use the credit card. Obviously with the credit card, I’d want to pay off the balance before I start getting charged interest.

[techwiz]

I used to keep cash in my Tangerine saving account and called it my Emergency Fund, but now I no longer have a Emergency Fund.

MMM's advice on Emergency Fund
https://www.youtube.com/watch?v=tFpJrqp0l_4

[alcon835]

I use my bank's HYSA. I'm at a whopping..... 0.4%. It sucks (especially because I have about what you do in there), but its cash whenever I need it - which is the whole point.

I'm also building up I-Series Bonds over the next 4-5 years. The goal is to get 1-year's living expenses in bonds that I can cash out post-FIRE if I need it and it can give me a bit more interest than a HYSA.

Oops, just realized this is the Canada discussion. Not sure that my comments above are helpful as I'm in the US!

[snacky]

I don't have an emergency fund. My money is in investments, in my TFSA, RRSP, and taxable account. I can access the TFSA and taxable  account money pretty easily, but I won't unless I'm buying an income-generating asset or am at the phase of my life when I draw down my accounts.

Instead, I have cheap, readily available credit. My home equity line of credit will give enough to cover over a year's expenses at 4%. If something happens that is so bad I can't fund it that way, I'll be dipping into my long term savings anyways. I've used this to cover renovations, months of low income and high expense, etc. and it's comforting to know that the money is always there if i need it. Meanwhile my investments bring in much more than 4% in an average year.

I have money because I made the little I had at the start work for me instead of sitting around. It's something I learned from the MMM blog.

[Dicey]

I have mine in an online savings account that pays a *staggering* .49%, I also move parts of it around doing bank bonuses, which gives you a little income and the safety of cash.

I was about to recommend this, but sonofsven beat me to it, so +1.