Unexpected financial emergencies are inevitable at some point in our lives, so we need to plan for that. Each person has a different opinion on how much one needs to sock away and by which means, such as a chequing or savings account. At Capstone, we believe in prudent planning, but this does not necessarily mean that you need to have a six-figure sum in your chequing account. Rather, we advocate for having easy access to funding of some sort on a near-term basis. How that gets accomplished, as well as the dollar amount needed, will look different on a case-by-case basis.
Most of the clients that we work with have access to a sizeable line of credit that they can draw on in a pinch, if needed. For those that prefer to have an option that does not necessitate borrowing funds, we will sometimes carve out a portion of a client’s Non-registered or Tax Free Savings Account (TFSA) to unofficially act as an emergency fund. Based on a client’s needs, we will invest a portion of these accounts within our more liquid funds which also possess lower volatility. This means that they will not be in the position of having to draw down assets at a loss in an emergency situation.
Whether you have an unexpected visit to a hospital in the States, which needs to be paid up front, or you’ve discovered a leaky roof that needs to be replaced imminently, life is full of surprises. We advise clients to have access to emergency funding, whether that be through their TFSA or through a line of credit which can cover life’s unplanned events. If you are unsure of how to achieve this, or how much to save, which accounts to use, etc., talk to your Portfolio Manager who will be able to help you plan for the unplanned.
Janet Kim Sing, Portfolio Manager
Capstone Private Wealth