Last September I was hiking in St. John’s, NL. While gawking at the ocean, I neglected to watch where my feet were headed and fell flat on my face. My fall resulted in whiplash, a concussion, a displaced jaw, scrapes and bruises. Since then, I’ve been seeking treatment from a slew of doctors, dentists, physiotherapists, chiropractors and massage therapists.
My road to recovery will take around one year and cost $10,000. Unfortunately, like many Canadians, my medical insurance is limited and unlikely to cover even 25 per cent of my expenses. So, I’m now on the hook for a series of bills I wasn’t expecting. My injury is a classic example of why it is important to have emergency funds.
Experts recommend that every household has three months of salary tucked away in case of an emergency. This is a lot of money! To make saving less painful, build this fund over time through automatic contributions to a savings plan that earns interest.
Start by setting aside three to five per cent of your income; then increase it to six of or seven per cent when you’re ready. Once you reach your savings goal, you can stop contributing.
Reduce the temptation to spend this cash by keeping the money somewhat accessible, but removed from your day-to-day spending. Consider putting it in a low-risk money market mutual fund, a GIC, or a high-interest savings account. Hopefully you’ll never experience an emergency. But, if you do, you’ll be prepared.