It is not ideal to be building an emergency fund in an emergency. But it does save us a little bit of explaining. Normally we’d be trying to convince you that an emergency fund is important, but in an emergency, the emergency does the persuading for us.

It may seem as though there aren’t any good choices right now. You may be facing an unexpected expense or a loss of income and when you look at the money coming in compared to the money going out, it seems a little scary. It’s hard to make decisions when you’re not only stretched financially but emotionally as well.

In this article, we’ll lay out ways to make your finances seem less scary. We’ll take you through the places to look for extra cash, as well as the places to look if you’re still coming up short. Then, we’ll look into some specific resources available during the current emergency.

Where to look to build your emergency Emergency Fund

Income

First, get an idea of how much income you’ll have coming in, whether it’s from work, insurance payments, or employment insurance. If you’re expecting some money as a tax refund or bonus, commit to setting aside as much of it as you can. This gives you an idea of what you have to work with. Our instinct may be to avoid facing the problem. But, as they say, if you have to swallow a frog, you don’t want to look at that sucker for too long.

Expenses

Second, consider what expenses you can cut. Look at a few recent banking and credit card statements and review how much you usually spend. How much of your spending is necessary and what could you survive without? Could you cook more dinners at home instead of ordering in? Are there subscriptions you no longer use or ones that you could do without for a period of time? Each of us will define unnecessary spending and acceptable trade-offs differently, so get creative with ways to cut back that work for you.

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Money you’re putting into your investments may not generally be considered an expense. But when you’re in an emergency, it becomes cash going out when you’re in dire need of cash coming in. You may consider temporarily cutting down on or cancelling the contributions you are making to your investment and retirement accounts if it means you’ll have an easier time taking care of your essential expenses.

While living on less is tough, remind yourself that your budget cuts are temporary. This is also a great opportunity to figure out what spending you really value and what spending you’ve let creep in without much reward.

As an added bonus, if you can carry some of the thrifty habits forced on you in this emergency over into your non-emergency life, you’ll have made your foundation for building wealth even stronger for the future.

Credit

Third, consider what sources of credit are available to you. Your very last resort in this process should be using your credit card as a source of cash. But when it comes to low-cost credit, say, under 7%, it can be a complex decision whether to use credit or to draw on your investments. If you’re working with RBC InvestEase, you can email or call one of our portfolio advisors to talk it through.

Investments

If you do end up having to dip into your investments, your goal is to minimize what gets trimmed off your money as it exits your account. Funds withdrawn from your RRSP may incur an immediate tax penalty depending on how much you withdraw. You may also have to declare the withdrawal as income the next time you file taxes, and may pay additional tax according to your marginal rate. And, after you make RRSP withdrawals, you don’t regain that contribution room. So, your RRSP is the one of the last places you want to look for emergency cash.

If you have both a non-registered account and a TFSA, the account to withdraw from depends on your situation. Withdrawing from a TFSA may have benefits because the money you withdraw is tax-free, and you will regain the contribution room represented by your withdrawal in the next calendar year.

On the other hand, if your emergency coincides with a downturn in the markets (as they often do), you may be able to use the decline you’ve experienced in your investments to offset your next tax bill on the funds you withdraw from a non-registered account. Again, a portfolio advisor —like the ones to which you have access to at RBC InvestEase—can give you guidance on the right choice.

Getting government and financial services support

If it’s the current coronavirus pandemic that has thrown you into emergency mode, certain financial benefits and relief are available from the Canadian and provincial governments, as well as various financial institutions and companies. The benefits and relief programs highlighted below are as of May 29, 2020.

Support from the government

If you’ve lost income because of the coronavirus, are living on a low-to-modest income, or have children, you may be eligible for various benefits, benefit-increases, and tax credits from the Canadian government. You can explore the current details of Canada-wide programs here (opens in new window to external site) .

The Canada Emergency Response Benefit (CERB) (opens in new window to external site) is the most commonly mentioned government program. It’s a taxable benefit of $2,000 every four weeks, for up to 16 weeks. You’ll have to claim the benefit as income on next year’s taxes, but that’s not something to worry too much about when you have an urgent need for cash. We’ve heard from a lot of people who are confused about the benefit’s eligibility requirements. RBC has set up an Eligibility Tool for clarity. If you are eligible, don’t forget to re-apply for benefits every four weeks because the benefit isn’t renewed automatically. You’ll be left hanging if you don’t re-apply.

The Government of Canada website also details how to set up CRA direct deposit via your financial institution (opens in new window to external site) to receive your payments more quickly. You can set up your CRA direct deposit with RBC here.

The deadline to file taxes has been deferred until June 1, 2020 and you can delay paying any taxes you end up owing until August 31, 2020. But, if you’re expecting a refund like the majority of Canadians, filing your taxes as soon as possible can be another addition to your emergency Emergency Fund.

Support from your financial service providers

Many financial institutions are offering payment deferrals on mortgages, credit cards, car loans and more. You’ll want to make sure that you know the details of any payment deferral; interest is often still building on these loans over the deferral period. You can take a look at RBC’s mortgage payment deferral calculator if you want to see whether skipping a mortgage payment is the right move for you.

To provide speedy financial relief, RBC has added self-serve options to its Online Banking and Mobile App platforms where clients can request a one-month deferral on mortgages, personal installment loans , auto-loans and credit cards. If you need longer term relief, use the RBC online booking tool to schedule a time to speak with an RBC representative.

We also recommend checking out RBC’s COVID Relief Rundown: Financial Relief Programs for Canadian that details relief being offered on both national and provincial levels, as well as details on the support programs being offered to RBC clients. And, as always, our RBC InvestEase portfolio advisors are available by phone or email if you need anything.