Emergency Fund
Quick Definition
A liquid savings reserve covering 3–6 months of living expenses for unexpected events.
Full Explanation
An emergency fund is a dedicated pool of easily accessible cash reserved for unexpected financial setbacks such as job loss, medical emergencies, car repairs, or home maintenance. Financial experts universally recommend maintaining 3–6 months of essential living expenses in a high-interest savings account (HISA) or TFSA. In Canada, where EI (Employment Insurance) typically takes 4–6 weeks to begin, having at least 2–3 months saved is critical. Emergency funds should be kept separate from regular savings to reduce the temptation to spend them.
Related Terms
High-Interest Savings Account (HISA)
A savings account offering above-average interest rates, often at online banks.
TFSA (Tax-Free Savings Account)
A flexible registered account where investment growth and withdrawals are completely tax-free.
Net Worth
The total value of your assets minus all your liabilities.
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