Do I Need An Emergency Fund?

Though we rarely want to think of worst-case scenarios, the truth is, they happen. When they do, it's important to be prepared. One of the best ways to plan for an urgent situation is to make sure you have the financial means to see yourself through with an emergency fund.


An emergency fund is money that is set aside for urgent scenarios. It's money that you put away but can easily access in a hurry when needed.

July 9, 2021 in Learn

Couple eating popcorn in bed

How to build an emergency fund in Canada

The best way to build an emergency fund in Canada, or anywhere else for that matter, is to set aside a bit of money every month in a separate bank account until you've built up a solid base. Make it an automatic payment, so you don't have to think about it—and so you can't put it off.


When you take money out of your emergency fund, make putting money back in the account a high priority, so you're prepared for the next urgent situation.

How much do I need in my emergency fund? 

The general rule of thumb is to have at least three to six months’ of liquid funds in an emergency fund. That should be based on a calculation of your typical monthly expenses, including your living expenses, bills, and credit cards.


When you set up your emergency fund in Canada, consider how much you can comfortably put away, what you would need to have available to help you feel secure, and your current and future financial obligations.

When emergency funds can be useful for you

There are a wide range of circumstances that could require you to dip into an emergency fund. These include job loss, medical bills, and other unexpected expenses.

Job loss

If you suddenly lose your job, you'll need money to get you through until you can start earning an income again. Losing your job doesn't mean you no longer have to pay your bills; it simply means you no longer have an income to help cover those costs.


You may need an emergency fund to cover your living expenses, bills, and other regular payments. You also want to give yourself a financial cushion, so you don't have to make a spur-of-the-moment career decision, where you just take whatever job comes along. An emergency fund can help you take some time to figure out the best move for you.

Medical bills

An emergency fund in Canada can come in handy for unexpected medical or dental bills, even though a lot of medical costs may be covered. But there still may be unanticipated costs linked to an illness or injury.


You need to know that you'll be financially sound if that should happen, so you don't spend your recovery time stressed out about how you'll pay for your care.

Home repairs

Homes can be expensive. The roof might need repairing, your hot water tank could burst, or your windows could break. You may need to replace an appliance or hire a plumber.


You might not be able to foresee all these events happening, but you can be financially prepared. That way, if something expensive breaks down in your home, you can cover those costs.


Keep in mind that your emergency fund should be used to cover urgent repairs, not renovations. Having your shower drain back up is an emergency, wanting a larger bathroom isn’t.

Auto repairs

Just like your home, your automobile can suffer damage.


Cars need regular maintenance and can be costly to fix. If you can't afford to fix your car, how long can you go without a vehicle? Rather than waiting for your car to break down and hoping the repairs don't cost you too much, you should have an emergency fund that you can draw from.

Veterinary bills

Our beloved animals can suffer a wide range of health problems and injuries. They may become unexpectedly sick or injure themselves and require surgery.


Thanks to improvements in animal medicine, there are many treatments to help your pets recover, but they can be costly. You don’t want to make a medical decision for your dog or cat based on not having money available for treatment.

Unexpected travel expenses

We don't always live close to our families and loved ones, so sudden illness or injury could require us to shell out a large sum of money to travel on short notice. It's important to know that you have money in your emergency fund to cover those costs.

Other events

Having an emergency fund not only helps ensure you can cover unexpected costs, it also decreases your stress when an unexpected event arises.


Before taking money out of your emergency fund, ask yourself three questions:



    • Is this event unexpected?

    • Is the cost urgent?

    • Is the cost necessary?


If you answer yes to two or three questions, it's reasonable for you to access your emergency fund. The situation isn't an emergency if you're paying for a wedding, making an investment, taking advantage of a store sale, going on vacation, or making a property tax payment.

Explore Our Cards

American Express Offers a range of Cards with different rewards and benefits tailored to your lifestyle and interests.