What is an Emergency Fund?

An Emergency Fund is money set aside to serve as a fallback for unexpected events or unplanned expenses. There are two types of financial emergencies: Spending and Income.

Spending emergencies are unplanned expenses, such as major home or car repairs, urgent vet visits, or even a root canal.

Income emergencies are unplanned income losses and can include job loss, prolonged illness, or an injury that prevents work.

These funds are different from your typical budgeting, saving, and spending. In fact, it is recommended to keep these funds in a separate savings account to avoid temptation. An Emergency or Crisis is a non-negotiable, whereas saving for a vacation or a new car is a want.

Emergency vs. Rainy-Day Fund

While these terms are sometimes used interchangeably, there are key differences between them. Although both situations are considered non-negotiable, a financial emergency typically involves a much larger amount than an occasional expense. It’s good practice to set aside both types of savings for more comprehensive financial security.

Why an Emergency Fund is Important

With an Emergency Fund, you can:

• Avoid debt by using your Emergency Fund instead of a credit card. Interest charges accumulate quickly if the balance isn’t paid off right away.
• Reduce stress with peace of mind, knowing you’re covered in a crisis.
• Protect your savings by not dipping into retirement or education plans, which can jeopardize your future. This way, an emergency doesn’t mean you stop working toward life goals.

In 2025…*

• 48% of Ontarians reported not having emergency savings
• 53% of Ontarians reported using their savings due to economic conditions
• 39% of Ontarians reported increased stress about their finances, up from 34% in 2024

Especially in times of economic uncertainty, having a safety net to fall back on can make an unexpected setback more manageable.

How to Start Your Emergency Fund

Set your Goal

Determine how much you’ll need for your fund. We recommend 3-9 months of living expenses, though that can vary by person based on monthly expenses. Decide on a monthly amount to put toward your goal.

Create a Budget

If you haven’t created a monthly budget yet, now is the perfect time to do so. Organize your finances so you can contribute to the fund while covering your other expenses. If you already have a budget, identify where you may need to cut back. Our Monthly Budget Builder is a free tool that can help.

Open an Account

One of the biggest pieces of advice is to open a separate account for your savings and investments. You can even put these funds in a HISA or TFSA to earn interest while still having easy access to them.

Automate your Savings

Set up monthly or per-paycheck automatic deposits to your savings account. Your fund will grow on its own each time you get paid, without you lifting a finger. Pro tip: Make a habit of also depositing your work bonuses or cash gifts into the account to get closer to your goal.

Using the Fund

Don’t be afraid to use your Emergency Fund if you truly need it. We recommend setting guidelines for what counts as a financial emergency for you. Maybe an operation isn’t a financial emergency because of your insurance, but your car being out of commission is. Setting realistic expectations can stop you from dipping into the fund for other expenses.

Rebuilding the Fund

In the unfortunate case you must use your emergency fund, you should start saving again as soon as possible. This would also be a good time to review your budget planning to ensure you are setting aside enough, especially if you have had major life changes since you started.

When to Stop

Your Emergency Fund is meant to provide peace of mind. After reaching your goal, redirect those savings toward other objectives, such as investments, vacations, or debt repayment.

*Data from the Financial Consumer Agency of Canada’s Dashboard on Canadians’ financial well-being, emergency savings, used savings, and stress sections (April 2026).

We’re here to help

At WFCU and its divisions, you can rest assured — we’re dedicated to your financial well-being.

Regardless of your stage of life or financial situation, we can guide you towards your financial goals with personalized advice. Start the conversation with one of our specialists today.