This week, after some research, I decided that our Emergency Fund would be best kept in a “Tax Free Savings Account” for three reasons.1) It earns interest (2% on the account I chose).2) The money is very easily accessible WITHOUT penalties.3) There is no real risk of principal loss (meaning the money I put in isn’t at risk like it would be in an investment).
I also decided to open my account with INGdirect.ca as they had the best advertised rate, there are no fees with the account and there are no penalties for withdrawing your money (unlike most of the regular banks like TD, CIBC, BMO, etc). ING direct also has a special referral bonus for BOTH people signing up with a referral code and those who referred it (with minimum $100 first deposit kept for 1 month). I used my friend Kyla’s code so I got the $25 dollars and Kyla should get it either in 1 months time or right away. Hey it’s like free money! If you’d like to take advantage of this, my Orange Key Code is: 35203307S1. Use it to get your own $25 and I’ll also get it too (thanks!). Signing up is quite quick and painless. All is done online within 5 minutes, with the exception of the first deposit which has to be mailed in (but is processed very quickly – within a couple business days). Once the cheque is received, you can transfer money online from the account which the cheque comes from & sign up or edit your automatic payments.
ING direct has many other accounts too, which you may find useful.
Emergencies Funds: it’s recommended that you should have 3-6 months of income set aside for short & long term emergencies. This is quite a lot of money and can seem overwhelming. To this I say “any one can eat an elephant, one bite at a time”. That might creep you out, lol, but essentially I’m saying to start with what you can ($25, $50, $100) and autocontribute it once a month (or with every paycheque). Then if emergency strikes, it’s better to have some savings, than none at all!
A little extra info on Tax Free Savings Accounts (TFSA):
-you have to be 18 to start one,
-you can contribute a maximum of $5000 per year,
-your earnings are tax free but there are no tax refunds for contributions (like there is with RRSPs),
-interests rates are fairly low, but higher than your average savings/chequing account,
-you can set up automatic withdrawals so that you are “paying yourself first” as they say.
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