Dear Peak Money,
Settle a household argument for me, please.
My husband and I understand the importance of an emergency fund but can't agree on building one. He thinks we should auto-deposit a percentage of our paycheques, whereas I think we should take $100 cash every pay period.
Whose emergency fund method is better?
Sincerely,
Counting on Cash
Dear Counting on Cash,
Either method of starting your emergency fund is going to be a great first step. The key is to automate it to a different bank account. I’d recommend opening a high interest savings account with another bank like EQ Bank or Tangerine (if you’re not already banking with them). This way it will keep the temptation away from spending the money that you’re trying to accumulate for your emergency fund.
In terms of how much to fund I think you need to calculate how much you want to save in your emergency fund and by when. For example, if you want $10,000 saved in 2 years, then you need to put away $416 a month or $208 twice a month. Doing this exercise will help you gain clarity on how much you should sock away each month.
Happy Savings!
Janine Rogan is the Founder and CEO of The Wealth Building Academy, an award-winning Chartered Professional Accountant (CPA), TEDx speaker, and the author of The Pink Tax. She also publishes weekly videos on Youtube and shares financial tips and tricks on Instagram.