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A CIBC poll conducted by Harris/Decima reveals that 45 per cent of Canadians do not have an emergency savings fund, meaning an unexpected expense or emergency could have them dipping into RRSPs or taking on debt to get by. The poll also shows that experience counts when it comes to planning ahead, with younger Canadians less likely to have an emergency savings fund.
"Once you've experienced the financial challenges that come with a leaky roof or an unexpected car repair, the value of having some cash set aside for emergencies becomes clear," says Christina Kramer, Executive Vice President, Retail Distribution and Channel Strategy, CIBC. "Our poll shows an opportunity for more Canadians to start building up an emergency fund, to help get them through an unexpected expense and avoid dipping into long term savings to pay for a short-term problem."
Canadians aged 45 to 64 are more likely to say their household has an emergency savings fund. This could be attributable to life experience — they may have experienced an emergency in the past and have learned to set money aside for a rainy day.
"It's important to plan for your long term financial goals, but you also need to be prepared for the unexpected by having some funds set aside for emergencies," notes Ms. Kramer. "For younger Canadians who are just starting out financially, building an emergency fund should be a priority, even if it's only a small amount that you build on over time."
It's important to distinguish between emergency savings, retirement savings and other savings goals. Your emergency savings account should be a separate account that you contribute to regularly, and while accessible, isn't touched for anything except emergencies.
Without emergency savings, you may need to turn to your RRSPs or to borrowing accounts to fund any emergency expenses, which can impact your ability to meet longer-term financial goals. "You don't want to be in a position where you need to cash out some of your RRSPs or take on debt because of an unexpected expense," says Ms. Kramer.
Even if you have built up emergency savings, it's important to remember that emergencies aren't once-in-a-lifetime occurrences. Once you’ve used your emergency savings fund, it's important to build it back up so that you are prepared for the next unexpected event.
To help you establish and build up an emergency savings fund, CIBC offers the following tips:
"There is a clear benefit to sitting down with an advisor and working through your savings plan to help you establish and maintain a plan that works to meet your life goals," adds Ms. Kramer.
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