Saving rainy day funds for emergencies like car and home repairs or healthcare can help you stay out of debt and have peace of mind. An emergency fund can help you by creating your own safety net to fall on when the unexpected happens. But how much should be in an emergency fund in Canada? The 2019 Canadian Financial Capability survey reports that just over two thirds of Canadians have an emergency fund sufficient to cover 3 months’ worth of expenses.
Read our guide below to learn where to keep an emergency fund in Canada and the best savings accounts to hold an emergency fund to help your savings grow so you’re ready for the day you might need them.
EQ Bank Notice Savings Account
3.50% - 3.65%
Interest Rate
$0
Account Fee
$0
Transaction Fee
The EQ Bank Notice Savings Account offers one of the highest on-going interest rates in Canada on a savings account. You'll earn up to 3.50% - 3.65% on your savings. Plus, if you're looking to save with a family member, you can apply for a Joint account.
Min. Age
N/A
Account Fee
$0
Transaction Fee
$0
Interac e-Transfer Fee
$0
Simplii High Interest Savings Account
6%
Interest Rate
$0
Account Fee
$0
Transaction Fee
The Simplii High Interest Savings Account is a powerful account to accelerate your emergency fund savings, especially since they offer one of the best promotional offers in Canada. It earns a high promo rate of 6% interest for 5 months (and 0.35% thereafter). With a $0 account fee and $0 transactions, you can look forward to saving more of your hard earned money.
Min. Age
18
Account Fee
$0
Transaction Fee
$0
Interac e-Transfer Fee
$0
NSF Fee
$45
International ATM Fee
$3
Scotiabank MomentumPLUS Savings Account
5.4%
Interest Rate
$0
Account Fee
$5.00
Transaction Fee
The Scotiabank MomentumPLUS Savings Account offers a high interest rate - especially if you take advantage of the promo rate and the tiered interest rates. Earn a savings rate of up to 5.4% for 3 months. Plus, enjoy free unlimited transfers between Scotiabank accounts.
Min. Age
18
Account Fee
$0
Transaction Fee
$5.00
Interac e-Transfer Fee
$0
KOHO Earn Interest
Up to 5.00%
Interest Rate
$0 - $19
Account Fee
$0
Transaction Fee
KOHO offers an online savings account with a host of added perks. There are free and paid plans available, allowing you to earn between 0.5% and 4% interest on your balance. You also get a linked reloadable prepaid Mastercard that you can use to make purchases, with cash back of up to 5% available depending on the plan you choose. KOHO also offers a suite of budgeting tools to help you track your spending and save more money, plus it provides access to a line of credit that you can use to build your credit history.
Min. Age
18
Account Fee
$0
Transaction Fee
$0
Interac e-Transfer Fee
$0
NSF Fee
$0
Neo Everyday Account
0.10%
Interest Rate
$0
Account Fee
$0
Transaction Fee
The Neo Everyday Account allows you to spend, save, and earn from one account. You'll earn interest on your savings and there are no minimum deposit requirements, account fees or transaction fees. Download the Neo app and sign up in a matter of minutes, all from the comfort of your own home.
Min. Age
18
Account Fee
$0
Transaction Fee
$0
Interac e-Transfer Fee
$0
NSF Fee
$0
International ATM Fee
$0
RBC High Interest eSavings Account
1.15%
Interest Rate
$0
Account Fee
$5.00
Transaction Fee
The RBC High Interest eSavings Account is a good fit for customers who want to bank online and would like to earn a high interest rate on their savings. It offers no minimum deposit requirements, zero monthly fees, free RBC transfers and one free ATM withdrawal per month.
Min. Age
18
Account Fee
$0
Transaction Fee
$5.00
Interac e-Transfer Fee
$1
Wealthsimple Cash
2.75% - 3.75%
Interest Rate
$0
Account Fee
$0
Transaction Fee
The Wealthsimple Cash is a no-fee account with all the benefits of a high interest savings account, however it also functions as a chequing account. Perks include earning 2.75% to 3.75% interest (depending on how much money you hold in your account), being able to access your pay a day early, CDIC deposit insurance of up to $500,000 and the ability to earn 1% back in stock, crypto or cash when you make a purchase with your card. With easy withdrawals, you can quickly access your money in case of an emergency.
Min. Age
18
Account Fee
$0
Transaction Fee
$0
Interac e-Transfer Fee
N/A
NSF Fee
$0
Tangerine Savings Account
6%
Interest Rate
$0
Account Fee
$0
Transaction Fee
You'll earn 6% for 5 months, then 0.30% thereafter on your savings, and then an on-going interest rate of 0.3%. Tangerine also offer on-going higher interest rates for existing customers, which means you can occasionally accelerate your savings with a higher interest rate.
Min. Age
16
Account Fee
$0
Transaction Fee
$0
Interac e-Transfer Fee
N/A
BMO Savings Builder Account
0.01%
Interest Rate
$0
Account Fee
$5.00
Transaction Fee
Earn 2.00% interest when you save at least $200 per month. Setting up automatic deposits here will ensure that you reach this goal each month and maximize the amount of interest you can make on your emergency fund. As a BMO customer, you can use online or mobile banking to easily manage your money.
Min. Age
18
Account Fee
$0
Transaction Fee
$5.00
Interac e-Transfer Fee
$5.00
CIBC eAdvantage High Interest Savings Account
5.75%
Interest Rate
N/A
Account Fee
$5
Transaction Fee
While you'll be able to take advantage of a promotional interest rate of 5.75% for 4 months when you open a new account, the CIBC eAdvantage High Interest Savings Account also comes with the ability to earn additional 'Smart Interest' when you save at least $200 per month. This can help accelerate your emergency fund savings.
Min. Age
N/A
Account Fee
N/A
Transaction Fee
$5
Interac e-Transfer Fee
N/A
An emergency fund is a financial safety net you can rely on if a major unexpected event happens in your life. When not being used, it can also help you earn interest and reach your financial goals. Unlike rainy day funds that are meant for smaller, one-off expenses, an emergency fund is there to help in significant times of crisis. People commonly use emergency funds for:
Emergency funds should be used for major emergencies and not for expenses you forgot to plan for like birthday gifts, property taxes, etc. If you can answer “yes” to these two questions, it’s most likely an emergency.
Here’s a step-by-step guide on how to start an emergency fund, or rainy day fund.
A general rule of thumb is to save between 3 to 6 month’s worth of expenses, while some experts suggest saving for up to 1 year. However, how much you can contribute depends on your income, expenses and financial goals among other factors.
You can start a small emergency fund with as little a few hundred dollars, which may come in handy for things like unexpected car repairs, pet emergencies or other essentials.
There’s no one-size-fits-all when it comes to calculating your emergency fund. Here are three possible methods to determine how much you need to tuck away for a rainy day.
Here’s how much you might put away using the monthly method after breaking down your monthly expenses:
| Category | Expenses |
|---|---|
| Rent | $1,000 |
| Groceries | $450 |
| Dining out | $350 |
| Car loan | $200 |
| Utilities | $150 |
| Miscellaneous expenses | $150 |
| Car insurance | $100 |
| Cell phone bill | $75 |
| Car fuel | $50 |
| Subscriptions | $30 |
| Total expenses | $2,555 |
If your goal is to have three months’ worth of expenses stored away, you’d need $7,620 ($2,540 x 3) in your emergency fund. For a more conservative savings plan of six months, you’d need $15,240 ($2,540 x 6).
If money is tight, it might be hard to find some extra cash to support your emergency fund. Instead, focus on what you can save, rather than what you should save. Here are a 4 tips to try to expedite your savings goals:
Having an emergency fund comes with a host of benefits, but there are also a few caveats to keep in mind.
Consider these factors when you’re comparing savings accounts for your emergency fund:
Savings accounts are the most common place to park an emergency fund, but there are alternatives. If you’re looking for a nontraditional place to store your money or want to build an additional reserve beyond a standard emergency fund, consider these other options:
Cashable GICs are an effective way to save for retirement but they can also be used as an emergency fund or safety net if you sign-up for a cashable GIC. Cashable GICs will let you take out your money anytime without a penalty.
Life insurance is a financial product that’s good to have, but never fun to think about. A cash value policy can protect your family if you die, but you can borrow from the policy if you need access to cash. You’re not required to pay back these loans, but they affect the balance your beneficiaries receive when you die.
Tax-free savings acccounts allow you to deposit up to $6,000 per year without paying capital gains taxes on anything you’ve earned, and far more if you haven’t yet opened a TFSA. This contribution room accumulates every year just like a Registered Retirement Savings Plan (RRSP), meaning that any unused room is carried over to subsequent years.
Finding a savings account that offers a high interest rate and low or no fees can help you grow your emergency fund quicker. Consider any of these savings accounts or compare your options to find another account that suits your needs.
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