30 Comments on “How Not to Start an Emergency Fund”

  1. howtobejillian

    I have a very similar system to the one you’ve now set up, but with two savings account an a few Excel spreadsheets. One I ant emergency fund and the other is for expenses I know are coming, like car insurance, Christmas, vet exams, and such. I LOVE it. I did what you first described for quite a while, and what I’ve noticed now (besides that I save more money… Though not as much as I had hoped) is that I feel so much less guilty when paying the expenses that aren’t in my monthly budget, just aren’t emergencies. Now that they are planned and saved for, it’s suuuuch a relief.

    I love that you have so many accounts 🙂 it will be awesome!

    1. Des

      I’m really looking forward to that too – the “Oh, this account is actually for this purchase, so there’s no guilt involved!” thing. It’s going to be sooooo good! Kudos to you for being on top of that, and thank you for sharing your experience with it – it’s so great to get other people’s perspectives on it!

  2. TidyTraveler

    I’ve always treated my savings account as a black box full of piranhas where I should never stick my hands unless the world is coming to an end…in which case I won’t miss my hands anyway. This mentality has allowed me to amass quite a bit there and now I can focus on investment and hopefully getting to FI. I do wish I’d been more proactive in my 20s about investments, so I’m glad you’re starting early; big kudos to you! 🙂

    1. Des

      This is, hands down, the BEST description of how to treat savings I have ever heard. I am dying laughing – “in which case I won’t miss my hands anyway.” Thank you so much for the kudos! It’s definitely been a learning experience over the past few months (and spoiler alert, from my tracking-expenses challenge, I can tell it’ll take me at least a few months to actually hit that half-saved target!) I’m so glad I got started when I did. Congrats on being on the FI path – that’s so impressive!

  3. hippyish

    Scenic route for sure. I have saved up my ’emergency fund’ to a few thousand $ seeeveral times, and withdrew it all at some point or another. Back to saving it up again.

    1. Des

      Good for you for saving it back up every time though! And there’s something to be said for the scenic route – I’m pretty sure if someone had told my new-grad self that *actually*, I should be saving in X number of accounts for all these different equally important goals, I would have either punched them or started to cry, haha. Due to a huge helping of luck, my “short-term savings” account never ran dry, and I’m glad I realized what was probably a better system in time.

  4. our next life

    It’s great you’ve seen the error of your ways, but honestly, I just think it’s impressive that you never had credit card debt. In my first few years out of college, I had tiny savings that I raided repeatedly AND some serious debt, and knew that was true for most of my friends. So give yourself a pat on the back for that, and for now being more intentional about your savings! 🙂

    1. Des

      Thank you so much! Honestly, I feel like no matter which way it goes, being a new grad is just hard with money, haha. It’s something I’m definitely going to write about, because the downside of the “not having credit card debt” was the “constantly feeling like I was never going to be able to afford anything, ever.” I was *so* conscious of how much money I had to spend, that even the suggestion of (really awesome, fun, amazing) things or experiences I wanted to do but couldn’t caused me a ton of stress. A now-hilarious example that was totally unfunny at the time: I was moving an Ikea desk into my apartment, tripped and ripped a hole in the knee of my favourite pair of jeans. Not a big deal, right? Well, I hadn’t budgeted for new jeans that month, and had a TOTAL meltdown about it.

      Somewhere, someone has probably found a middle ground right out of school, lol. I would read the heck out of their blog and how they did that.

  5. Sarah

    Yeah! I have CapitalOne 360 in the US, and I have all sorts of “piggy banks” where I amortize major expenses over the course of the year. I have an emergency fund, vacation, charity, major purchases, Christmas, etc. Like, at one point I realized I was spending $300 on Christmas cookies every year (I make a LOT and it’s my gift to coworkers and friends). Tack on Christmas gifts, and I thought, ok I’ll put $50/mo in my Christmas fund and then I will have planned for it. So far, so good, and I haven’t had to experience the terror of opening a January credit card statement in a few years now. Keep it up – I’m 6 years out of grad school and always adjusting how I’m saving. After reading a lot of PF blogs recently I started saving a lot more, which really makes it obvious when I splurge and theres $300 left in my checking account with a few weeks until payday!

    1. Des

      Oh I *love* that you call them piggy banks! That is so wonderful and I might just have to start doing that.

      Also, I think it’s so fun that you’re so into Christmas cookies! I took a slightly different cookie approach last year and made 10 Mason jars “pre-loaded” with all of the dry ingredients for triple chocolate brownies, and then gave those out as gifts to family with the extra instructions to bake them on the card. It probably worked out to about $10 per jar (maybe a bit less?) but for 10 gifts, it was a big win, and (at least to my face, haha) people seemed to really like them. I’m sure everyone who gets your cookies absolutely adores then and looks forward to it every year! So many kudos on saving for it year round 🙂

    1. Des

      Hahaha it helps that I can’t stand shoe shopping – I’m very much a “buy the first shoes that fit my budget and my massive feet and leave” shoe shopper. It all balances out in the end though, because when I’m in a running shoe store, it’s like “Budgets? What budgets? Give me the pretty ones that feel like clouds on my feet please.” Thank you so much for the comment 🙂

    1. Des

      It really is super tough to build a balance when you have those legitimate reasons to withdraw money, eh? Like “This is my only savings, so of course this is the account I will use to pay for X and Y.” That said, I am glad no one told me when I was a new grad this wouldn’t work, because I would have been a ball of stress trying to build two respectable savings accounts! I guess I’m just now “ready” to tackle it.

      1. culbia

        Yes – because it was allowed to raid it for instant gratifications, it never felt like “proper” saving, so I never felt I had to do without this money. I think saving “properly” is something you mature in to… ideally…

  6. allroundbetterme

    We started a few Tangerine accounts last year when we started saving for our wedding. I really like having the different accounts for the various savings goals. It makes it so clear!

    1. Des

      I couldn’t agree more! Plus it makes it a whole lot easier to track your progress towards each one (like your sidebar graph! That would be a nightmare to maintain if it was all lumped together, haha.) And serious, hardcore congrats on saving for the wedding – I have a few friends who have gone into debt for their big days and they aren’t too pleased about it in retrospect!

  7. Katelynne

    I feel stuck on the emergency fund right now. A year after emptying my accounts to buy a house, we managed to leave a nice chunk of change in our accounts for an emergency fund. I have swiped off the top of it a couple times for some minor expenses and every time I do it I kick myself. I’m trying to ramp up my other savings so I’m not tempted but it feels easy and I want to figure out if I have it in the right account but it seems all too much right now hahah! I hit the sweet spot with our house expenses and now I think I can put that in autopilot and focus on savings that are more focused and stay away from the emergency fund temptation!

    1. Des

      I (clearly) totally get the emergency fund skimming, since I did it for years! It sounds like you are in great shape though, especially keeping some money in the emergency fund through a house purchase – that is seriously impressive! I know it’s the “best practice” and all, but actually doing it deserves congrats every time.

      Honestly, my biggest thing with the separate, focused accounts is trying to keep it reasonable – I could so easily think of ten big things that could legitimately have their own accounts, if I wanted to get that granular. To not get totally overwhelmed I figured a few at a time was a good idea, and then I can put those on autopilot like your house expenses and take on some others.

      Thanks for the comment, Katelynne!

  8. itpaysdividends

    I use the multiple savings account approach as well! I just had too much trouble tracking all my goals when I just had one generic savings account. I was never positive that I wasn’t cutting into my emergency savings without realizing. Nice job making the shift away from your emergency fund funding your purchasing!

    1. Des

      Thank you! And oh my gosh, I know the feeling of trying to keep multiple tallies separate in your head when they’re all sitting in a lump sum in one account. This way makes it a lot more black and white, on top of being way way easier.

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  10. Matt Molkoski

    Hey Des!

    Great blog, I’ve really enjoyed reading it.

    One question on the multiple accounts thing. Are all of your accounts with one bank? And how do you set up the transfers? Do they occur automatically through the bank/auto transfers or do you manually go through and do everything every paycheque/month?

    Thanks again for the advice and great blog!


    1. Des

      Hey Matt – thank you so much! It’s always fun when people I know in real life find the blog 🙂

      Yes to the one bank thing for the most part. I use Tangerine, mostly because I do all of my banking online anyways and I hate paying bank fees, so I’ve set up automatic transfers that trigger after each of my paycheques into my different savings accounts. The only thing that’s not with Tangerine is my TFSA and RRSP, which I have invested with Wealthsimple – it’s still pretty easy to contribute, I just set them up as a bill payment option with Tangerine, and I do that one manually.

      If you want to find out more about either I’m happy to chat more! (But seriously, no-fee banking is the best thing ever. Especially since Tangerine lets you withdraw cash for free from any Scotiabank ATM!)

      1. Matt Molkoski

        Thanks Des! You can thank our mutual friend Mel for leading me here! 🙂

        I’ll definitely look into Tangerine. Currently my savings accounts are no-fee, as long as I only use them for transfering money into and out of online, but my main chequing account has a fee if I dip below a certain balance. So I’ll take a look to figure out the best option.

        One quick question about your emergency fund. You are aiming for $10,000, which is a fairly large amount to be sitting in a bank account not doing anything. Do you just leave it to gain interest? Or do you invest it in stable things that are easy to divulge if you need to?



        1. Des

          Hahaha that is the $10,000 question for sure – I’ve seen a lot of different takes on it, but my philosophy is that is I might need the money in the next 2-3 years, I keep it in a high-interest savings account. My current Tangerine accounts pay 0.8%, which is around what I’d get on many 2 to 3 year GICs in the first place (and doesn’t take into consideration that a) Tangerine pays bonus interest rates from time to time and b) that I can access the money anytime!)

          Since the difference between a Tangerine savings account and a GIC at this point is pretty marginal, I just consider any interest lost to be an “insurance payment” on making sure I don’t lose any of the capital. Anything riskier than those two options is a great fit for longer term goals, but if the point of the emergency fund is to be there when I need it, I definitely keep it in an accessible account. Especially after starting to invest this summer and getting a crash course in market downturns, haha.

          Last thing – I actually went back and calculated what I really need in my emergency fund to see if the $10,000 figure was actually accurate, and it turns out I need a little bit less than that (for now anyways, haha.)

  11. Anthony

    The key for me is setting up an emergency fund not just in a separate account but a separate bank which ensures there is a challenge to easily transferring back to your disposable income – followed by strict rules about what it can be used for.

    1. Desirae

      Definitely! I did that after writing this, when I finally opened an account with EQ Bank – it’s been so great! It never even crosses my mind to raid it, but it’s still there if I need it within a day or two.

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