Lots of people think having an emergency fund sounds boring.
But the truth is that having a few months of expenses saved up and ready to go is actually pretty sexy.
First off, it’s huge for peace of mind, and using money to relieve stress is almost always a bargain.
Second, it allows you to be more aggressive in other areas. You can be a little bolder at work, speak up a little louder. You can be more aggressive with your TFSA investments, knowing you won’t need to immediately dip into that bucket if you happen to lose your job or your car breaks down.
Third, you can be more strategic with your purchases. You can pay bills annually rather than monthly, redirect that monthly payment back to your emergency savings, and come out money ahead.
Fourth, when you have a good foundation in place, you can take advantage of other investment opportunities when they arise, including aggressively buying market dips.
Emergency funds aren’t just about defence. They allow you to play offence.
And if you’re worried about inflation, they don’t need to sit in cash in a bank account that pays almost no interest.
You can get a better checking account with no fees that actually pays at least a small rate.
You can use a high-interest savings account to get an even better rate.
If you own your home and have a bit of equity, you can get a Home Equity Line of Credit and keep your emergency fund on your mortgage balance, saving you interest.
Or you can keep your emergency fund in a Whole Life insurance policy that’s optimized for cash value, so that it grows at a steady rate no matter what, even when you have to dip into it for emergencies.