How to Start an Emergency Fund 😷


Saving up for the future can be quite daunting for many of us who are on the road to repaying our debts. According to a new survey by the Canadian Payroll Association, “nearly half of workers are living paycheque to paycheque due to soaring spending and debt levels” (Globe and Mail, 2017). The reality is, that it has become far too common for nearly half the working population in Canada to be in debt — so stop trying to “keep up with the Joneses” since the Joneses are likely in debt too.

Whether you’re paying off your student loans, mortgage payments, credit card debts, etc., setting aside some short-term funds in the case of an emergency is crucial to your financial well-being. Having an emergency fund will give you a peace of mind knowing that if you face an unexpected injury/illness or you’re out of work for a few months, you’ll still be able pay for your basic necessities.

The question of how much you should set aside for an emergency differs for everyone, but generally, 3 to 6 months of your regular expenses is a good start (or 3 to 6 months of income) as suggested by the Financial Consumer Agency of Canada (FCAC).


To get started, here are five simple steps on how to start an emergency fund:

1. Understand your regular expenses

An important step to understanding how much is required for your emergency fund is to start by understanding your regular expenses. This will give you a good estimate on how much money is going out.

If you don’t already track your expenses, you can see this automatically on your Koho account and see the breakdown of your expenses with Koho Insights. Compare this amount to how much money is coming in (i.e. your income) and evaluate how much you will need to cover for your basic necessities.

2. Set up a savings account

While Koho should be used as your smart spending account, we always encourage our members to keep their existing bank account(s) for other purposes such as having a savings account to build an emergency fund.

Keep in mind that your savings account should be separate from your daily expenses, and should only be accessed in the case of an emergency. Here are some great tips from the FCAC on what you should look for in a savings account.

3. Automate your savings

Most financial institutions allow you to make recurring or scheduled transfers from one account to another. Alternatively, you can set a reminder for yourself to make a transfer every week or every month, depending on what works for you.

Start by setting aside smaller amounts from your chequing account (or your Koho account) to your savings account—if you can start with as little as $5 a week, that’s already a great start. By automating your savings, your emergency fund will grow in no time, and you can slowly increase the amount when you can.

4. Be realistic

We typically recommend Koho members to monitor their expenses for at least 1-3 months on Koho. However, after about three months, you’ll begin to really understand what your regular spending habits look like. As the fundamental goal of an emergency fund is to help fund for your basic needs (i.e. food, shelter, and clothing), be realistic about how much you’d like to save for your emergency fund based on your current weekly expenses. If you’re unable to contribute to your emergency fund on a regular basis, review what can be minimized from your weekly expenses to meet your goal.

Additionally, consider adding a little extra to your emergency fund for things such transportation costs (either to bus or fly back to your parents’/relatives’ home) and a basic cellphone plan to take phone interviews when applying for a new job. Forgo any fears of judgement or shame and prioritize on taking care of your own well-being.

5. Review and adjust accordingly

As with any strategy, review how much you’ve set aside for your emergency fund on a monthly, or even quarterly basis. If you’re still not near your goal within a few months, adjust your daily expenses, or find ways to increase your sources of income. If you’ve met your emergency fund goal, way to go! Now you can adjust your recurring contributions to go towards your next big goal.



We hope you found this helpful in preparing for those unexpected rainy days, but as always, feel free to ping us on our in-app chat if you need any help with saving up for your financial goals on Koho.

About the Author

Lynn Shinto

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Community Manager