A majority of Canadians are unprepared for financial emergencies. Even among the relatively affluent – those with a six-figure household income – a large number say they are unprepared for an emergency or loss of employment, a new survey revealed.
The survey found that 23% do not feel prepared for a financial emergency, and a third would be unable to last more than three months off their savings. However, only half of Canadians have the equivalent of three months of expenses set aside, the recommended minimum, and fully one-quarter are living paycheque to paycheque.
"Financial emergencies, such as a broken furnace or major car repairs, can crop up at any time and, without some form of financial cushion, can potentially cause households to take on more debt than is necessary," said Janet Peddigrew, BMO vice president. "The ideal emergency savings fund should be equal to three to six months of your income."
According to the a survey, conducted by Pollara for Bank of Montreal, while 66% of Canadians feel prepared financially to handle a 'rainy day', more than half (51%) have less than $10,000 in savings to cover unexpected expenses, and almost one in five (17%) have less than $1,000.
Among households with six-figure annual incomes, fully one-quarter have less than $10,000, while one-in-four (23%) do not feel prepared for a financial emergency, and one-in-three (33%) said they would be unable to last more than three months off their savings.
The annual survey asked Canadians how prepared they are in the event of a change in job status, change in financial situation or unforeseen financial emergency. It found that 17% have less than $1,000 in savings to draw, while another 20% less than $5,000, 14% have between $5,000-$9,999 in emergency savings. Around one-in-five Canadians (18%) have set aside $50,000 or more for a 'rainy day'
The survey also found downward movement from the previous year. A little more than half of Canadians, 51%, have the equivalent of three months of expenses set aside, that’s down three percentage points from 2012. There was an equivalent rise of three points in those who have less than three months (43%).
The study found that 68% have had to dip into their rainy day fund in the past, with car repairs (25%), job loss (21%), and home repairs (20%) being the most common reasons.
The study found that those in the Prairies feel the most prepared to handle a financial 'rainy day' (74%), while those in Atlantic Canada face the greatest challenge, with 60% claiming to be prepared, down 14 points from 2012.
Those over the age of 65 are the most likely to feel prepared (84%), while those between the ages of 35-44 are the least likely (59%).