How Can Newcomers to Canada Build an Emergency Fund?

For newcomers to Canada, financial uncertainty is common in the first few years. Unexpected costs such as medical bills, urgent home repairs, or job loss can quickly strain your budget. An emergency fund ensures you can handle these surprises without harming your financial health. This guide covers:

• Why you need an emergency fund and what it is
• How much should you have for an emergency fund
• Where to keep your funds
• Types of emergency funds
• Practical tips for newcomers to start saving.

Why You Need an Emergency Fund

According to Statistics Canada (2023), one in four Canadians reports difficulty covering a $500 unexpected expense. Having an emergency fund significantly reduces this risk.

Why it matters:

• Helps cover urgent expenses like medical bills or dental expenses not fully covered by provincial health insurance (ie, Ontario Health Insurance Program)
• Provides financial security during job loss
• Prevents reliance on credit cards or loans.

Health emergencies can happen anytime, and medical costs can be high before provincial coverage applies. If you’re new to Canada, it’s vital to understand your healthcare options; learn how newcomers can access free healthcare in Canada.

Emergencies newcomers might face

While traditional emergencies include medical bills and home repairs, newcomers may also encounter immigration, housing, employment, and banking emergencies. Preparing for these emergencies can make your transition to Canada smoother and less stressful.

Recommended amount

• Traditional fund: Three to six months of living expenses
• Stash of cash: $500–$1,500 for short-term emergencies.

Types of Emergency Funds for Newcomers

1. Traditional emergency fund

• Covers three to six months of living expenses
• Use for major emergencies: medical, home repairs, essential appliances
• Store in a separate, easily accessible savings account (e.g., high-interest savings account).

Tip: Start small and gradually increase your fund. Even $50 – $100 per month can add up over time.

2. Stash of cash

• Small cash reserve ($500–$1,500) kept at home for immediate access
• Useful during power outages, ATM downtime, or natural disasters.

Tip: Only keep a small amount at home. Keep your main fund in a bank account for security.

Read next: How to Save Money on Rent in Canada.

3. Passive income

Extra income streams can act as a safety net during a financial setback.

Examples of passive income for newcomers in Canada:

• Freelancing (writing, design, tutoring)
• Selling used items on Kijiji or Facebook Marketplace
• Creating digital products, such as courses or blogs.

• If you’re a newcomer homeowner with an extra room, consider renting out a room. Sharing accommodation Renting out a room in your home. Read more about about to become a host: How to Share a Home as a Newcomer.

According to Statistics Canada Household Income Survey shows that households with multiple income streams are 30% more likely to maintain financial stability during job loss.

How to Start Saving for Your Emergency Fund in Canada

• Set a monthly savings goal: Even $50–$100 is a good start.
• Open a dedicated savings account: Avoid using your emergency fund for daily expenses.
• Track your expenses: Use a budgeting app on your phone to identify areas to reduce spending.
• Automate your savings: Set up automatic transfers to your emergency fund.
• Consider alternative income sources: Part-time work or freelancing can quickly grow your emergency funds.

Tracking your monthly spending is key to building an emergency fund. Use our Cost of Living in Canada guide to see typical expenses newcomers face and find areas where you can save.

Your saving habits can protect you from the unexpected, and it’s important since nearly 40% of Canadians say they couldn’t cover a $500 expense without borrowing.

As you set up your emergency savings, it’s also a great time to start building your credit in Canada. Responsible use of credit helps you qualify for better banking products and boosts your financial confidence as a newcomer. Learn more about Building Credit as a Newcomer.

Watch the video to discover common mistakes newcomers make with credit cards that can harm their credit rating in Canada:

FAQs: Emergency Funds for Newcomers

Next Steps for Newcomers

Start building your emergency fund today by:

• Opening a dedicated savings account
• Setting aside a small monthly amount
• Diversifying your income streams.

Tip: Explore our Financial Literacy Month guide to learn how to manage finances, set goals, and grow your emergency fund.

Final Thoughts

Start building your emergency fund today, even with small monthly savings, a cash stash, or passive income. Combined with good credit habits, you’ll have financial security and peace of mind.

Remember: saving for emergencies and building credit go hand-in-hand; together, they form the foundation of a strong, stable financial life in Canada. Take the first step today and start planning for both your short-term and long-term financial security.

For more money-saving guidance, explore our Managing Money section.