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‘Just in case’ money

Canadians are continuously bombarded by headlines about record personaland family debt levels, doubts about the long-term solvency of manypension plans and the far-from-robust employment picture.

Canadians are continuously bombarded by headlines about record personal and family debt levels, doubts about the long-term solvency of many pension plans and the far-from-robust employment picture. All this has created unprecedented pressure to pay down debt, and save for education and retirement.



Of course, it’s a very good idea. And Canadians are taking it seriously as the accumulation of household debt has slowed and our net savings rate has risen from almost zero a couple of years ago to just under four per cent of income today.



But the problem with paying down debt and boosting savings is that most lives are not linear. The ups and downs of living have kiboshed many a savings and debt payment plan.



My family was rocked 20 years ago when our youngest, Quinn, then four, almost died from meningitis. She survived but ended up profoundly deaf. We lost a year of income, which is tough to recover for anyone, let alone freelance writers.



I can’t think of a friend or family member who hasn’t fallen victim to one of life’s vagaries. Often those events meant detoured careers and postponed retirements. Unfortunately, many of them had no ready funds to draw on, so they were forced to dip into their RRSPs or their kids’ RESPs (registered education savings account.)



Consider building emergency funds (a TFSA is a great place to park the money) into your savings plan. If you experience an unexpected expense, what you’ve saved will help cushion the blow.

 
 
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