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Saving Money and Managing Debt

Saving up for hard times: Camille and Calvin's story Add to ...

Ten years ago, Camille and Calvin had a $25,000 car loan and a $200,000 mortgage. The couple had turned down insuring these loans because it would have cost about $80 a month – close to $1,000 a year. They thought it was a waste of money because they weren’t sure they would ever need the insurance. 

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Instead, they saved an equal amount in an emergency fund. They figured that if they never had to use these savings, they could use the money after retirement. After 10 years, they had saved about $12,400.

That’s when it happened: Camille was laid off. Suddenly, she went from making $4,000 a month before tax, to less than $1,700 a month from Employment Insurance. With their debt still high, Camille and Calvin need to draw $1,000 a month from their emergency fund. How long will their money last?

Lesson learned: If Camille gets a new job within a year, she and Calvin will be able to get by. If it takes longer, they may run out of savings. Now they wish they had put some of their money into insurance. It would have made it a lot easier to get through this tough time.

Content in this section is provided in partnership with Investor Education Fund, a non-profit organization founded and supported by the Ontario Securities Commission that provides unbiased and independent financial tools to help Canadians make better money decisions. To find out more, go to: GetSmarterAboutMoney.ca

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