Pattie Lovett-Reid

Chief Financial Commentator, CTV

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If you don’t think you need an emergency fund, think again. No matter how financially prepared you are, life has a way of throwing curve balls that you never expect. Those “unexpected expenses” are the reason many financial professionals suggest keeping three to six months of living expenses tucked away in a savings account or investment that is fairly easy to access.

If you don’t have the money set aside consider getting a line of credit or additional credit card and then use them only in emergency situations. The challenge you could be faced with by not preparing ahead of time occurs when you need access to credit or money you might not be able to get it. It is hard to get a credit card if you are unemployed.

As well, many will push back against having  money sitting idle in a cash account. Bottom line, an emergency fund is best if never used and invaluable if you need it. To answer the question how much you really need  - enough to get you out of a difficult situation. If the car breaks down, you lose your job the roof leaks etc. If you are living close to the margin and would be in financial trouble if your pay was delayed you need to have access to some money.

Typically, I would agree you need three to six months living expenses. But if you lose your job according to Workopolis getting a new job takes time. Job searches can last anywhere from two days to over a year, but for most people it is roughly four months. The largest group, 50 per cent of people surveyed by Workopolis, told them it took approximately 16 weeks to secure their most recent job. The time to find a job varies and is about 21 weeks on average but if you are between 55-64 it is 35 weeks or longer.

Here are some tips for effectively building your emergency fund:

• Break it down. Decide how much you want in your emergency fund, start small and tuck some money away each month
• Set up automatic pre-authorized purchase plans
• Arrange for a line of credit or a credit card for emergency purposes only

CTV's Chief Financial Commentator Pattie Lovett-Reid offers a financial tip of the day during the month of February for Your Money Month.