It’s something we all fear – the dreaded financial emergency we are not prepared for. Maybe it’s an unexpected vehicle repair or it’s the middle of winter and your furnace stopped running. Or worse, you’ve lost your job and you don’t know how to make ends meet until you find a new one.
These scenarios are stressful on their own, never mind with the added pressure of having the available funds to cover expenses. That’s why being financially prepared for emergencies, big and small, is so important – and it’s easier than you think!
This year, Westoba is encouraging members to get financially fit, whether that’s saving for retirement, buying a new home, sending your kids to university, passing down a family business or farm, or setting aside a rainy-day fund for unforeseen circumstances. The financial wellness of our members is so important to us and getting into shape financially is a good exercise for everyone.
In this article, we want our members to know why saving for emergencies is so important, what they can do to start building up that emergency fund and how Westoba can help along the way.
Why are Emergency Savings so Important?
Emergency savings are funds that can be accessed quickly and easily in a time of need and can help cover things like medical emergencies, house and auto repairs, or everyday expenses in the event you lose your job or can’t work. If and when unexpected expenses arise, you should utilize your emergency savings rather than relying on credit or withdrawing investments (which could have tax consequences depending on type). In an ideal situation, an emergency should not contribute to one’s debt.
Unexpected expenses pop up all the time and 1 in 3 Canadians are not prepared for them. That means a huge chunk of the population does not have funds readily available to cover these costs. Knowing that you have money tucked aside can give you peace of mind should emergency expenses arise.
“We want members to think of emergency savings like an insurance policy,” said Sarah Ferguson, Westoba Branch Manager in Brandon, MB. “If you are going through an emergency, you don’t want the additional stress of worrying about how you will pay for it.”
How Big Should My Emergency Fund Be?
The size of an emergency fund will vary from person to person, depending on your lifestyle, monthly expenses and income. While there is no one set amount, most financial institutions recommend setting aside three to six month’s salary or at a minimum, enough to cover 3-6 months’ worth of expenses.
This may seem like an unobtainable goal, but it’s not something that needs to happen overnight. Start with as little as a few hundred dollars and build from there. “The idea is to get into a regular habit of putting aside money on a regular basis and over time, that emergency fund will continue to grow and grow,” adds Sarah.
What Should I Do if I Have an Emergency and No Funds?
In a worst-case scenario where you encounter an emergency but have no funds available, there are steps you can take to minimize the impact to you financially.
Talk to your financial institution. If you find you are in a situation where you cannot make payments or are feeling financial stresses, talk to us. We can help you develop a plan. Look at consolidating loans, adjusting payment schedules and reviewing your budget.
Reduce monthly expenses. Take a look at your monthly expenses and try to eliminate the unnecessary ones to free up extra money (this is where having a budget comes in handy, but we will get into that more later). So, that may mean taking a break from your favourite streaming service or coffee shop or spending less on groceries until you can get that emergency expense paid off.
Payment plans. Looking at your payment structure may be another option, depending on the expense. While it’s always nicer to get rid of a big bill all at once, it’s not always possible for everyone. It never hurts to explain your situation and ask if accommodations can be made to have you pay back the expense over time.
How Do I Start to Save?
Sarah also suggests having a plan in place to regularly set aside money into an emergency fund. It is an important part of ensuring an individual is financially fit. A report by the Financial Consumer Agency of Canada indicates that individuals who actively save have higher levels of financial resilience and higher levels of overall financial well-being. But knowing how to get started can be overwhelming – remember more than half of Canadians in the report above do not regularly save money to cover their unexpected expenses.
|Financial Behaviour||Very often/Often||Now and then||Seldom/Never|
|Saving to cover an unexpected expense||47%||29%||24%|
|Use of credit to buy food or to pay for expenses because of running short of money||14%||16%||70%|
|Financial Behaviour||Fits well/Fairly well||Neutral||Does not fit well/At all|
|I am impulsive and tend to buy things even when I can’t afford them||8%||14%||78%|
Table Credit: Financial Consumer Agency of Canada*
Building a budget can be a useful strategy in managing your day-to-day finances, debt and meeting your long-term financial goals. It can help you plan for retirement or save for things like education or a house. It can also help you with your shorter-term goals like home improvements, repairs and vacations. Our Budget Workbook is a useful tool in getting you started.
Once this budget is in place and you better understand your monthly expenses, you will be able to come up with a plan to start setting aside a certain amount of money each month. We recommend having this amount automictically transferred from your existing bank account into a new emergency savings account. This allows you to stick to a plan without really needing to think about it.
How Can Westoba Help?
As we enter a new year, it’s a great time to schedule a financial check-up with a Westoba Financial Consultant. A financial checkup is an opportunity for you to sit down and gain a good understanding of your financial status. During the meeting, a Westoba Financial Consultant will focus on your financial priorities – whether that includes paying down debt or saving for something specific. They will help you design a tailored action plan to achieve these goals as fast and efficiently as possible. They will help you complete a cash flow statement to determine where your money goes every month, how much is leftover and will even assist with budgeting.
As an added benefit to members, Westoba now offers a new free Financial Fitness Checkup Quiz that can be taken at home or brought into a branch to complete with a Financial Consultant. Once completed, your financial fitness result will help identify further steps you should take to continue on your journey to financial fitness including cash flow and net worth tools, lending solutions and/or meeting with a Financial Consultant.
Regardless of your financial situation, you should consider an annual review of your finances to ensure you are staying on top of your goals. Many members have a variety of financial goals and often the resources to accomplish only some of them.
Westoba is dedicated to our member’s financial well-being and will always be here to provide sound financial advice that has our member’s goals at the forefront. To get started, consider booking a financial checkup with one of our financial professionals to make sure your plans for today and the future are on the right track.
Call 1-877-WESTOBA or click the link below to get help setting up your very own financial fitness program or for a free consultation.