Amid U.S. tariff storms, you really need a rainy-day fund. Here's where to park your money

Toronto Star

04-05-2025

It turns out, Canadians aren't just nice — we're also pretty good savers.
The Financial Consumer Agency of Canada found that as of 2024, 53 per cent of Canadian adults had an emergency fund that could cover three months of expenses.
Personal Finance
Bringing a dog home just got more expensive. Here's how to keep your best friend happy and healthy on a budget
Aspiring dog parents can expect to pay between $1,750 and $4,655 in upfront costs to bring one home.
Now, a first-quarter survey by EQ Bank finds that 53 per cent of respondents have increased the size of their emergency savings in the past three months or are planning to do so.
Deciding where to park your cash, however, is just as important as how much you put aside.
ARTICLE CONTINUES BELOW
The general rule of thumb is to have three to six months' worth of living expenses at the ready should your economic life go awry.
Personal Finance
Death binder 101: Your guide to assembling documents that make life easier for your survivors
Everything from account numbers and subscriptions to social media instructions and passwords are
But the actual amount you need can vary depending on several factors, including your job stability, says Jason Heath, managing director at Objective Financial Partners in Toronto.
'If somebody is a business owner that is in a sector that's reliant on the economy being good,' says Heath, 'I would be more inclined these days to have a larger emergency fund.'
Liquidity is key when deciding where to keep your cash, says NerdWallet Canada spokesperson Shannon Terrell.
'Your emergency fund is like a financial fire extinguisher,' she says. 'You hope you never have to use it, but should the need arise, you want it within reach — not stuffed inside a cabinet.'
Natasha Macmillan, director of everyday banking at rate comparison site Ratehub.ca, agrees.
ARTICLE CONTINUES BELOW
ARTICLE CONTINUES BELOW
'Since emergencies are unpredictable, you'll want an account that is easily accessible. You should be able to withdraw your funds instantly and with no penalties.'
Macmillan suggests looking at a high-interest savings account (HISA) or a cashable guaranteed investment certificate (GIC) that allows withdrawals before maturity.
Both options offer a balance of security, flexibility and returns, she adds.
She also recommends comparing interest rates at various institutions and reading the fine print on whether an account has minimum balance requirements or fees.
Some HISAs, for instance, charge a fee after you exceed an allotted number of free withdrawals or transfers.
Look for an account that offers Canada Deposit Insurance Corporation (CDIC) insurance, which protects up to $100,000 held in accounts at eligible institutions, Heath advises.
And it's generally best to avoid tying up emergency funds in investment accounts, like mutual funds, stocks and ETFs, says Macmillan.
ARTICLE CONTINUES BELOW
ARTICLE CONTINUES BELOW
'You want your emergency funds accessible and safe, not invested in the market where your funds will fluctuate.'
Terrell agrees, adding that it can take days, sometimes weeks, for trades to settle in your account — a difficult timeframe when dealing with financial emergencies.
Be careful about keeping your emergency fund in a TFSA or using your RRSP for emergency savings.
While TFSA withdrawals are not taxed, Terrell cautions that re-contributing that amount in the same calendar year can trigger a one per cent monthly penalty if you accidentally over-contribute.
'RRSP withdrawals, on the other hand, are subject to withholding tax and are counted as taxable income, which could lead to a bigger bill come tax season.'
With tax season wrapped up for most Canadians, Macmillan suggests using a refund to launch your emergency nest egg or to top up an existing one.
'With economic uncertainty ahead, it's a smart time for Canadians to strengthen their financial foundations.'