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Jessica Moorhouse says her move to Toronto from Vancouver wouldn’t have been possible without the emergency fund she dipped into while looking for a new job.Galit Rodan/The Globe and Mail

Jessica Moorhouse started taking her money seriously about six years ago, after she graduated from Simon Fraser University in British Columbia with a degree in film production. The Coquitlam, B.C., native moved out on her own with little more than a laptop and a few hundred dollars.

Straight out of university, Ms. Moorhouse got a job at a local newspaper, but it didn't take long for her and her fiancé, Josh G. Bowman, a recording engineer, to feel as though Vancouver didn't offer enough career opportunities for either of them. Even though neither knew a soul in Toronto, they plotted out a plan to move there after they married in May of 2013.

A key part of their preparation was the building up of an emergency fund, a stash of cash they could draw from in the very likely event that it would take them time to find work.

"After we got married, we sold everything in our apartment, stored some stuff at my parents' place, and got into his little hatchback and drove across the country," says Ms. Moorhouse, 29. "It seemed kind of crazy. We really had to start from the ground up.

"Looking back, I'm really glad we took that risk of coming here," she says. "We were unemployed for about three months and couldn't get EI [Employment Insurance], so our emergency funds really made that move possible. And we're better off for it now; we both have higher-paying jobs."

Financial advisers all suggest establishing an emergency fund with enough cash to cover at least three months of your net income in case something unexpected comes along, such as job loss, illness, or a major house or car repair, so that you don't have to go into debt to cover it.

Ms. Moorhouse, who works in digital marketing and blogs about personal finance at, has had one since she left home.

"I wanted to make sure I had some security in case something happened; I knew so many friends who were in debt, and I didn't want that," she says. "Once we finally started working, we started to replace it. I feel like no matter what your situation, you should always have an emergency fund. I don't feel comfortable unless I have $10,000 in a savings account in case something happens. I'm pretty averse to debt."

According to a 2015 Bank of Montreal survey, 56 per cent of Canadians say they have less than $10,000 in available emergency funds, 44 per cent have less than $5,000, and 21 per cent have less than $1,000. Twenty-nine per cent said their savings would only last one month or less, while one-quarter reported that they have enough to last them over a year.

The Rainy Day Survey of 1,000 adults, conducted by Pollara, also revealed that 24 per cent of Canadians say they are living paycheque to paycheque with hardly anything set aside for a financial emergency. However, it also found that the average amount Canadians have tucked away for a curve ball is $41,694, up $6,457 from 2014.

Paul Shelestowsky, senior wealth adviser at Meridian, an Ontario credit union, says that, anecdotally, it is far more common to hear people say that they are living paycheque to paycheque than that they have a few thousand dollars in a "What if?" fund.

"People who have emergency funds tend to be people who have been savers all the way through and they've always been able to live below their means," Mr. Shelestowsky says. "It's getting harder and harder for people to live within their means or with the amount of debt they have.

"The people who are using TFSAs [tax-free savings accounts], who have TFSAs maxed out, are generally people that already had their money somewhere else and have found another place to shelter it."

Having recently raided his own emergency fund for a house repair, Mr. Shelestowsky endorses having such a stockpile rather than relying on credit to cover a crisis.

"I look at a line of credit or a home equity line of credit as more of a Band-Aid," he says. "You're going to have to pay it back. You should ignore your emergency fund and try and think of it as something you don't have access to. It's for needs, not for wants.

"To me, it's all about peace of mind," he adds. "In a perfect world, you would always have something to fall back on because you just never know what's going to come down the pipeline."

To build up an emergency fund, Mr. Shelestowsky says you need to do a little legwork first: Start tracking your expenses.

"It's the single hardest thing for people to do, but it's one of the best things you can for do for your finances," he says. "If you don't have a sense of what your expenses are, you can't make a budget, and without a budget you're going to be going paycheque to paycheque."

Websites such as and other online tools and apps make tracking expenses easy. From there, Mr. Shelestowsky suggests setting up a small preauthorized automatic withdrawal so that a certain amount of money comes out of every paycheque and goes straight into a savings account. Say you get paid biweekly and start with $20 a cheque; at the end of the year you will have $520. Increase that amount as your income rises. If you get a bonus or a tax refund, put some or all of that money in your emergency fund as well.

While the basic rule of thumb is to have enough money to cover at least three months of net income, even that may not be enough, says certified financial planner Julia Chung of JYC Financial in South Surrey, B.C.

"Most people severely lowball their expenses; they think they spend way less than they actually do," Ms. Chung says. "If you spend 100 per cent of your paycheque when it comes in, as many people do, then your expenses equal your net income.

"The three-month rule is based on the assumption that the individual has a disability policy, either personally or through their employer, that provides them with a benefit after 90 to 120 days of illness," she adds. "During that period, their employer may provide them with a short-term disability benefit or they may not. Even in the situation where someone does receive that benefit after 90 to 120 days and does not have a short-term disability benefit, how much is the long-term disability benefit? It's not 100 per cent of your income; it's usually somewhere between 50 per cent and 80 per cent of your income and may or may not be taxable. This will change your emergency-funds amount."

She notes, too, that contract workers, business owners and those who are self-employed should consider having at least six months of net income on hand.

"Many business owners will have a year [of net income set aside], particularly when they are in a volatile industry or in startup mode," she says. "Many other business owners will have nothing because they put 100 per cent of their funds into the business, but six to 12 months would be much, much better."

As for where to park that money, the general consensus is that a TFSA is the best vehicle because funds are easily accessible and won't come with a tax hit upon withdrawal. Mutual funds aren't intended for short-term holdings. Ms. Chung notes that high-interest savings accounts, redeemable or cashable guaranteed investment certificates, term deposits and money market funds are other options – though she offers a caveat.

"When you're looking at vehicles for your emergency funds, ask yourself: Can I access it quickly and at low cost?" she says. "Emergencies rarely show up during business hours and have pens ready to sign off with your financial institution. Make sure a reasonable portion is available at midnight on a Sunday when you're in a rural area with two flat tires. This is Canada."

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