How much should my emergency fund be?

Three to six months of essential costs is the usual target, and 6 to 12 months if you’re self-employed or your income varies. On essentials of $2,500 a month, that’s $7,500 to $15,000.

Should I keep my emergency fund in a TFSA?

A high-interest savings account inside a TFSA is a good home for it: the interest is tax-free and you can take money out any time. What you take out is added back to your TFSA room on January 1 of the next year, so don’t put it back in the same year unless you have room.

Can I use my RRSP as an emergency fund?

It’s a last resort. Tax is withheld when you take money out, the withdrawal is added to your taxable income, and you lose that contribution room for good.

Is a line of credit enough instead of savings?

It’s a useful backup, but it’s borrowing: you pay interest, and the bank can lower or freeze the limit, often at the moment you need it, such as in a downturn. Cash comes first.

Should I save an emergency fund or pay off debt first?

Build a small starter fund of about $1,000 or one month of essentials first, then focus on high-interest debt such as credit cards, then build the rest.

Emergency fund in Canada: how much and where to keep it

Why it comes first

Without savings, a $1,200 car repair or a furnace that breaks in January goes on a credit card, where the big banks’ standard rate is about 20%. One surprise can turn into months of debt. An emergency fund breaks that cycle, and lets you ride out losing a job without panic.

How much do you need?

Add up your essential monthly costs only: rent or mortgage, groceries, hydro and heat, insurance, transportation, phone and minimum debt payments. Then multiply:

Your situation	Aim for
Steady job, no dependants	3 months
Family, single income or a less secure job	6 months
Self-employed or income that varies	6 to 12 months

Example: essentials of $2,500 a month mean a fund of $7,500 to $15,000.

How far EI goes

If you lose your job, Employment Insurance regular benefits pay 55% of your average insurable earnings, for 14 to 45 weeks depending on how long you worked and the unemployment rate where you live. Earnings above $68,900 a year don’t count, so EI pays at most $729 a week, and it’s taxable.

What EI pays if you lose your job A week before tax, 2026: 55% of your pay, for 14 to 45 weeks

Earning $60,000 a year EI replaces 55%: Your pay: $1,154 EI: $635
Earning $100,000 a year EI replaces 38%: Your pay: $1,923 EI: $729

Your emergency fund covers the gap, and the wait for your first payment

EI counts earnings up to $68,900 a year, so it pays at most $729 a week. It’s taxable, and you need enough insurable hours to qualify.

You also need enough insurable hours to qualify, and the first payment can take a few weeks. Self-employed people aren’t covered for regular benefits at all. Your emergency fund covers the gap and the wait. See what you’d get with the EI calculator.

Where to keep it

A high-interest savings account at a CDIC member bank: safe, easy to get at and paying interest. Deposits are covered up to $100,000 per category if the bank fails. Credit unions are covered by provincial deposit insurance instead.
Or a high-interest savings account inside your TFSA, so the interest is tax-free. You can take it out any time, and you get the room back on January 1 of the next year.
Some in a cashable GIC, if you want a slightly better rate on part of it. You can usually cash it early, after a short lock-in period.
Not in stocks. Markets can fall at the same time you lose your job.
Not in your RRSP. Withdrawals have tax taken off, count as income, and you lose the room for good.

Compare rates with the savings interest calculator. Online banks often pay more than the big banks’ regular savings accounts, but watch for promotional rates that drop after a few months.

How to build it from nothing

Start with a small goal, such as $1,000 or one month of essentials.
Automate a transfer on payday, even $25 or $50.
Add windfalls: part of a tax refund, a bonus, or a Canada Groceries and Essentials Benefit payment.
Once you have a starter fund, pay off high-interest debt and take any employer RRSP match, then build the rest.

When to use it

Use it for real emergencies: losing your job, urgent repairs, medical or dental bills your plan doesn’t cover, or travel for a family emergency. Not for holidays. When you use it, refill it before going back to other goals. If you can’t keep up with bills even with savings, get free help early: see help with debt.