Best emergency fund savings accounts

Saving rainy day funds for emergencies like car and home repairs or healthcare can help you stay out of debt and have peace of mind. An emergency fund can help you by creating your own safety net to fall on when the unexpected happens.

But how much should be in an emergency fund in Canada? The 2019 Canadian Financial Capability survey reports that just over two thirds of Canadians have an emergency fund sufficient to cover 3 months’ worth of expenses. Read our guide below to learn where to keep an emergency fund in Canada and the best savings accounts to hold an emergency fund to help your savings grow so you’re ready for the day you might need them.

What is an emergency fund?

An emergency fund is a financial safety net you can rely on if a major unexpected event happens in your life. When not being used, it can also help you earn interest and reach your financial goals. Unlike rainy day funds that are meant for smaller, one-off expenses, an emergency fund is there to help in significant times of crisis. People commonly use emergency funds for:

• Job loss
• Major illness or injury
• Major home repairs caused by natural disasters

Best emergency fund savings accounts

• Methodology: How we selected the best emergency fund savings accounts in Canada

  We’ve chosen the products on this page based on the providers available through Finder and online in the Canadian marketplace. These savings accounts are not representative of the entire market. When choosing the best savings accounts, we considered key factors including the interest rate, how rewarding an account is in terms of growing savings and how easy it was to open. That meant digging into account details like type, annual percentage yield (APY), monthly fee, minimum deposit to open the account, minimum balance to earn interest and signup bonus. No single high interest savings account will be the best choice for everyone, so compare your options before applying. We may receive compensation when you click links to our partners.

Go to site

Scotiabank MomentumPLUS Savings Account

5% for 5 months,
1.6% thereafter
Interest Rate

$0
Account Fee

$5.00
Transaction Fee

• Info
• Pros + Cons
• More Details

The Scotiabank MomentumPLUS Savings Account offers a high interest rate - especially if you take advantage of the promo rate and the tiered interest rates. Earn a savings rate of up to 5.00% for 5 months. Plus, enjoy free unlimited transfers between Scotiabank accounts.

• $0 account fee
• Earn 5.00% for 5 months, 1.6% thereafter interest on your deposits
• $0 Interac eTransfers
• You’ll get an additional load of interest at regular intervals within your first year. This payout will occur at 90 days (0.15%), 180 days (0.25%), 270 days (0.35%) and 360 days (0.45%).

• $1.50 out-of-network ATM withdrawal fee
• It takes some time to earn a higher interest rate with this tiered interest rate account

Min. Age	18
Account Fee	$0
Transaction Fee	$5.00
Interac e-Transfer Fee	$0

Go to site

EQ Bank Savings Plus Account

2.5%
Interest Rate

$0
Account Fee

$0
Transaction Fee

• Info
• Pros + Cons
• More Details

The EQ Bank Savings Plus Account offers one of the highest on-going interest rates in Canada on a savings account. You'll earn 2.50% on your savings. Enjoy zero everyday banking fees, free transactions and no minimum balance. Plus, if you're looking to save with a family member, you can apply for a Joint account.

• $0 account fee
• $0 transactions
• $0 Interac eTransfers
• Earn 2.50% interest on your balance

• No physical branches for in-person service
• Some standard banking features not available such as overdraft protection, use of ATMs and the option to have paper statements

Min. Age	18
Account Fee	$0
Transaction Fee	$0
Interac e-Transfer Fee	$0
NSF Fee	$0

Tangerine Savings Account

4.5% for 5 months,
1% thereafter
Interest Rate

$0
Account Fee

$0
Transaction Fee

• Info
• Pros + Cons
• More Details

You'll earn 4.50% for 5 months on your savings, and then an on-going interest rate of 1%. Tangerine also offer on-going higher interest rates for existing customers, which means you can occasionally accelerate your savings with a higher interest rate.

• $0 account fee
• $0 transactions
• N/A Interac eTransfers
• Earn 4.50% for 5 months interest on your balance, and 1% thereafter

• No physical branches for in-person service

Min. Age	16
Account Fee	$0
Transaction Fee	$0
Interac e-Transfer Fee	N/A

When should I use my emergency savings?

Emergency funds should be used for major emergencies and not for expenses you forgot to plan for like birthday gifts, property taxes, etc. If you can answer “yes” to these two questions, it’s most likely an emergency.

1. Is this an urgent expense?
2. Was it completely unexpected?

5 steps to build an emergency fund

Here’s a step-by-step guide on how to start an emergency fund, or rainy day fund.

1. Create a budget. You won’t know how much you’ll need to save each month for your emergency fund until you know how much you spend each month. That starts with creating a budget and tracking your bills, expenses and spending.
2. Decide how much to save. If you’re just starting your emergency fund, set a smaller goal of $500 or $1,000. Once you get there, you can set a higher goal of three to six months’ of expenses, depending on your needs. Determine how much to set aside each month to reach this goal.
3. Decide where you’ll keep your money. There are several types of accounts you can use for your emergency fund. Start out with a high-yield savings account from a digital or online bank first, then decide if you’d like to move some of your savings into stocks once you’ve saved a nice buffer. Just note that you won’t want to move all your funds into a stocks, as you may pay a penalty when you try to access your money for emergencies. Keep all or most of your emergency fund in an accessible place.
4. Automate your savings. Setup your bank accounts so that part of your paycheque automatically gets transferred to your emergency fund each time you get paid. For example, digital banks like Monzo let you automatically round up your debit card purchases to the nearest dollar and deposit the difference to your bank account. Other banks may let you transfer a percentage of your paycheque straight to savings. If money is tight, start with a small amount like 5%, then work your way up. No amount is too small to start saving.
5. Save away unexpected money. Boost your emergency fund by saving any extra money you receive throughout the year, such as birthday or holiday money, work bonuses, tax refunds, credit or debit card rewards and so on.

How much should I have in an emergency fund?

A general rule of thumb is to save between 3 to 6 month’s worth of expenses, while some experts suggest saving for up to 1 year. However, how much you can contribute depends on your income, expenses and financial goals among other factors.

You can start a small emergency fund with as little a few hundred dollars, which may come in handy for things like unexpected car repairs, pet emergencies or other essentials.

3 ways to calculate for an emergency fund

There’s no one-size-fits-all when it comes to calculating your emergency fund. Here are three possible methods to determine how much you need to tuck away for a rainy day.

1. Base method. With this method, you’d need to put away $500 to $1,000 for a few of the most common unexpected expenses like care repairs and medical expenses.
2. Monthly method. Estimate your daily living expenses for one month. Multiply that amount by three or six months to have a nice cushion in your emergency fund. If your income is unstable, consider saving enough to cover expenses for six months or more.
3. Dave Ramsey’s emergency fund. Dave Ramsey, a finance radio show host and author, combines the base and monthly method. He recommends starting with $700 in your emergency fund until you’ve paid off all of your consumer debt. Then, beef up your fund by saving three to six months’ worth of expenses.

What if I’m living paycheque-to-paycheque?

If money is tight, it might be hard to find some extra cash to support your emergency fund. Instead, focus on what you can save, rather than what you should save. Here are a 4 tips to try to expedite your savings goals:

1. Evaluate your monthly budget. Take a hard look at your spending and see if there are any areas that you can slim down on your budget. Reallocate those funds toward savings.
2. Try different savings strategies. Experiment with different savings challenges to find a technique that works for you. For example, the $5 savings trick is to pay for everything in cash and stash away any $5 that you get back in change.
3. Use a rewards card. Go for a credit card that pays you back for everyday spending. Some cards can help jumpstart your savings with generous signup bonuses.
4. Open an interest-earning account. A high-yield savings account rewards you for saving. The more you have in your bank account, the more interest you’ll accumulate.

Emergency fund pros and cons

Having an emergency fund comes with a host of benefits, but there are also a few caveats to keep in mind.

How to compare the best emergency fund savings accounts for rainy day funds

Consider these factors when you’re comparing savings accounts for your emergency fund:

Access

Does the account offer online or mobile access to manage your money and view account activity? How robust is their mobile banking app? Compare our top 5 banking apps here.

Customer service

How can you reach customer service if you need help with your account? If the bank is purely online, is their customer service 24/7 by phone or live chat?

Interest

Does the account pay a competitive interest rate?

Deposits and withdrawals

Can you easily make withdrawals through transfers or with an ATM card?

Fees

Does this bank account charge monthly or service fees that could eat into your balance?

Requirements

Find out how much you’re required to deposit or maintain when you open the account.

Compare more savings accounts to use for an emergency fund

Sort by:

Name	Product	Promo Rate	Regular Interest Rate	Monthly Account Fee	Transaction Fee	e-Transfer Fee	CDIC Insured	Offer
Neo Money Account		N/A	2.25%	$0	$0	$0		Open an account and get a $5 bonus.	Go to site View details	Compare	loading Fetching your data...
EQ Bank Savings Plus Account		N/A	2.50%	$0	$0	$0			Go to site View details	Compare	loading Fetching your data...
Simplii High Interest Savings Account		5.25% until April 30	0.40%	$0	$0	$0			Go to site View details	Compare	loading Fetching your data...
KOHO Save		N/A	2.00%	$0	$0	$0		Use promo code FINDERCODE and get a $20 cash bonus when you make your first purchase within 30 days.	Go to site View details	Compare	loading Fetching your data...

loading

CompareClear

Alternatives for my emergency savings

Savings accounts are the most common place to park an emergency fund, but there are alternatives. If you’re looking for a nontraditional place to store your money or want to build an additional reserve beyond a standard emergency fund, consider these other options:

Cashable GICs

Cashable GICs are an effective way to save for retirement but they can also be used as an emergency fund or safety net if you sign-up for a cashable GIC. Cashable GICs will let you take out your money anytime without a penalty.

Cash-value life insurance

Life insurance is a financial product that’s good to have, but never fun to think about. A cash value policy can protect your family if you die, but you can borrow from the policy if you need access to cash. You’re not required to pay back these loans, but they affect the balance your beneficiaries receive when you die.

Tax-free savings accounts

Tax-free savings acccounts allow you to deposit up to $6,000 per year without paying capital gains taxes on anything you’ve earned, and far more if you haven’t yet opened a TFSA. This contribution room accumulates every year just like a Registered Retirement Savings Plan (RRSP), meaning that any unused room is carried over to subsequent years.

Bottom line on saving for a rainy day

Finding a savings account that offers a high interest rate and low or no fees can help you grow your emergency fund quicker. Consider any of these savings accounts or compare your options to find another account that suits your needs.

Emergency fund FAQs

• What is an emergency fund?

  An emergency fund is money set aside for emergencies such as car repairs, medical bills or living expenses. It can come in handy if unexpected expenses pop up or if you lose your job and need to cover living expenses while you look for new employment.

• How do I build an emergency fund for saving for a rainy day?

  You can build an emergency fund just like you'd save for any other financial goal. First, determine how much you want to save, then make an initial deposit or recurring contributions into the account until you reach your goal. Read our 5 easy steps to building an emergency fund.

• Can I invest my emergency fund?

  Yes. Just keep in mind that some investments might take longer to withdraw when you need cash.

  It's up to you. Many people use their emergency funds for large, unexpected bills like car repairs, vet bills or home improvements, but you can access your funds whenever you see fit.