Hi, welcome to Redeem the Commute. I’m Ryan, your host for the Money Course.
Today is all about savings.
Why might we save? Think of a few reasons…
Here are some examples:
- Planned future spending
- Maintaining control
- No need to borrow/pay interest
- Safety net for the unexpected!
- Bank gives you (a bit) of money
- Guilt free shopping!
Savings also includes “Planned Spending” – The essentials that you know are coming up e.g. Christmas, Insurance, Birthdays, etc.
But it’s also important for emergencies!
A 2015 survey of Canadians found 24 per cent of respondents said they had hardly anything set aside and more than half, 56 per cent, reported having less than $10,000 in available emergency funds.
Canadians and Ontarians on average have $41,000 in emergency savings.
Twenty-nine per cent said their savings would only last one month or less, while one-quarter reported that they have enough to last them over a year.
The most common rule of thumb I’ve heard is that we should aim for 3 months of income in our emergency savings, in case of disability, sickness, job loss or otherwise. For contract workers, business owners and the self-employed, that rises to six months of income. It’s all about planning for the unexpected. It might not exactly give you peace of mind – a crisis is a crisis – but it’s one less thing to immediately deal with when the unexpected arises.
Question: How much do you have in emergency savings, or savings at all? How many months of your income could it replace?