High living costs are stalling many Canadians' efforts to build a financial cushion
Almost four in ten Canadians with household income under $100,000 have no emergency savings at all.
The RBC Emergency Readiness Poll, which surveyed Canadians aged 18 and older, found that a lack of savings to absorb sudden costs is a widespread concern regardless of income bracket. More than half of respondents said they worry they haven't put aside enough to handle an emergency, while 44% reported actually facing an unplanned expense in the past year.
Another 42% said they're concerned that a single major unexpected cost could throw their finances off course, and a third, 33%, said even a minor unplanned expense would be tough to absorb.
Vehicle repairs and other transportation costs topped the list of financial worries at 39%, followed by major home repairs at 38% and medical or health-related expenses at 31%.
"Financial stress in any form can affect how secure and in control people feel," said Erica Nielsen, Group Head, RBC Personal Banking. "We want to help Canadians build the habit of setting some money aside regularly, even a small amount, so that when expenses arise without warning, they have the financial breathing room to handle them."
The overwhelming reason Canadians gave for struggling to build or maintain a rainy-day fund was simply the cost of living, cited by 76% of respondents overall. That figure climbed even higher in certain regions, reaching 86% in Alberta, 83% in Atlantic Canada, and 79% in both Ontario and the Saskatchewan/Manitoba region.
Other obstacles reported nationally included competing financial priorities that leave no room for saving (55%, rising to 64% in Saskatchewan/Manitoba and 59% in Atlantic Canada), finances stretched too thin to make headway (45%, climbing to 51% in Atlantic Canada and 49% in Alberta), and having to dip into existing emergency savings for non-emergency spending (29% nationally, 42% in Atlantic Canada).
Separately, 41% of all respondents admitted they had underestimated how much they ought to be setting aside for emergencies, and 25% said they'd recently tapped their fund for a crisis but hadn't yet replenished it.
How Canadians would cover a shock expense
Asked how they'd actually pay for an unexpected cost, 41% said they'd draw on an emergency fund, 35% pointed to a credit card, and 15% said they'd turn to family or friends for a loan. One in five respondents, 20%, said they'd never even thought about how they'd cover such a cost.
Among the 68% of respondents who do have an emergency fund, roughly half (49%) build it through regular monthly contributions, a third (34%) top it up with leftover cash at month's end, and just over a quarter cut back on spending (27%) or use a dedicated savings account (27%) to grow it.
"It's encouraging to see how many Canadians are adopting two of the most effective ways to build their emergency fund: by using a dedicated savings account and through consistent contributions," Nielsen noted.
"Keeping your emergency fund in a separate account makes it less likely you'll spend that money until you truly need it. And by setting up pre-authorized contributions, from your paycheque for example, your emergency fund can grow steadily in the background while you focus on other priorities," said Nielsen. "Having that approach in place can help bring peace of mind and better position you, financially and emotionally, to manage whatever comes your way."
Half of those surveyed, 50%, said they wish they'd started an emergency fund sooner, suggesting that even modest early contributions make a meaningful difference over time.
When asked why having a fund matters beyond the dollars and cents, respondents pointed to peace of mind (51%) and lower stress (46%) as the leading benefits. On the financial side, having a safety net (49%), staying out of debt (42%) and getting through difficult stretches (35%) ranked as the top motivators.
