How big should your emergency fund be?
An emergency fund covers job loss, medical bills not covered by your provincial plan or benefits, and surprise expenses you cannot put on a credit card. The standard rule is 3 to 6 months of essential monthly expenses (rent or mortgage, groceries, utilities, insurance, transit), not your full lifestyle. Park it in a high-interest savings account at a CDIC-insured institution, or a cashable GIC. Six months if you have dependants or work in a volatile sector, three if you are dual-income and rent.
If your essential expenses are $3,500 a month, target $10,500 to $21,000. A practical split: $3,000 in a chequing account for instant access, the rest in a 4.5% HISA at a CDIC-insured bank. At 4.5%, a $15,000 balance earns about $675 a year while staying fully liquid. You do not need it to grow; you need it to be there when the EI cheque takes six weeks.
Investing your emergency fund in a global equity ETF inside a TFSA ‘so it does not sit idle’. It will sit idle precisely on the day you need it, after a 30% drawdown, two weeks after you got laid off. Boring is the point.
A 60-second lesson on this, with a worked drill, lives inside the Finlo app. Free, forever, on the basics.