How Starting your emergency Fund will make You Rich
Ever wondered if saving could be your path to wealth? This article reveals an unexpected key: your emergency fund. Explore how starting small can lead to extraordinary financial gains, safeguard your future, and lay the groundwork for true prosperity. Discover the surprising secrets hidden in everyday savings.
Tuesday, June 10, 2025
B.A.S.E. C.A.M.P.
Why Emergency Funds Matter
Wealth begins with security. An emergency fund is your financial safety net, protecting you from unexpected events while setting the foundation for long-term wealth. The sooner you start building yours, the sooner you can achieve financial freedom and peace of mind. Let’s break it down step by step.
Step 1: Start Saving NOW
The best time to plant a tree was 40 years ago. The next best time is now. I know it's a cliche but it's true.
20% of your income should be going to your emergency fund. This means that every 5 months you will have saved 1 month's worth of emergency funds.
It will take you 27 months (2 years 3 months and 9 days ) to reach your 6-month emergency reserve goal. ( unless you increase income and/or decrease expenses to add more to the emergency reserve. )
Formula for Success:
Calculate how much you need to live monthly and add 30%. Why 30% more?
Emergencies aren’t just about surviving—they’re about thriving. This buffer accounts for unexpected costs, giving you the freedom to handle challenges with ease.
Example Calculation:
• Monthly living needs = $4,000
• 30% buffer = $1,200
• Total monthly emergency fund = $5,200
How Much to Save:
• Beginner (3–6 months): $15,600–$31,200
• OG’s (9–12 months): $46,800–$62,400
• MITMs (24 months+): $124,800
Step 2: Where to Put Your Emergency Fund
1. Start with a High-Interest Savings Account (HISA):
• Build your 3–6 months’ emergency fund here.
• Any funds beyond this can be allocated elsewhere for growth with zero risk.
2. Use Growth Vehicles:
• Guaranteed Investment Certificate (GIC): A short-term, low-risk option.
• Whole Life Insurance Policy: Provides liquidity through policy loans while allowing your money to grow uninterrupted.
Here are 2 scenarios
Scenario 1: Using GICs
• Save 3.5–4 months in your HISA for immediate needs.
• Allocate additional funds into a short-term GIC inside a Tax-Free Savings Account (TFSA) to maximize tax-free growth.
Example Calculation:
• HISA (Liquid Gold): $18,200 (3.5 months)
• GIC: $13,000 (remaining funds)
• Total Emergency Fund: $31,200
Scenario 2: Using a Whole Life Policy
• Keep 21 days’ worth of cash in a HISA for immediate liquidity.
• Park the rest in a Whole Life Insurance Policy and access funds via policy loans during emergencies (loan processing time: ~12 business days).
Example Calculation:
• HISA (Liquid Gold): $3,640 (21 days)
• Whole Life Policy (Gold Vault): $27,560
• Total Emergency Fund: $31,200
Key Takeaway:
Both strategies ensure your money grows while staying accessible during emergencies. Choose the one that aligns with your financial situation and goals.
These aren't the only 2 strategies that exist, you should talk with your financial advisor about what strategy would make sense for you.
Step 3: Strategize—How Much, How Soon?
This step really depends on you, your life, your income etc, etc.
But here is a quick overview.
• Start Young: If you’re 16–24 and living at home, this is the perfect time to save aggressively. Lower expenses mean faster progress.
• Older with Responsibilities? Adjust your timeline, but keep moving forward. Set milestones: 3 months, 6 months, 1 year, and beyond.
Examples of Milestones:
• 3 months: $15,600
• 6 months: $31,200
• 1 year: $62,400.00
• 2 years: $124,800
Pro Tip: The ultimate short term goal goal is Stage 4 of Wealth: One full year of expenses saved. Imagine taking a year off and still being financially secure.
Step 4: Expand Your Wealth—Turn Savings into Growth
Congratulations—you’ve mastered saving and built a rock-solid emergency fund. Now, let’s talk about the next step: making your money work harder for you. This is where wealth building truly begins.
Saving is your foundation, but investing is your elevator. To move beyond financial security into true wealth, you’ll need to learn how to allocate your money into growth-focused vehicles. Here’s a sneak peek at what’s possible:
Level Up: From Saver to Investor
1. Start Small with Low-Risk Investments
Once you’ve saved 3–6 months of expenses, any additional funds can be strategically allocated into safe, growth-oriented investments. Examples include:
• Segregated Funds (Seg Funds): These offer market growth potential with built-in protection for your principal.
• Guaranteed Investment Certificates (GICs): Ideal for ultra-low-risk short-term savings goals.
• Dividend Stocks: A great way to earn passive income while building long-term wealth.
2. Leverage Tax-Advantaged Accounts
• Use your TFSA (Tax-Free Savings Account) to shield your investment earnings from taxes.
• Explore RRSPs (Registered Retirement Savings Plans) for long-term growth and tax benefits.
The Next Big Step: Explore Growth Opportunities
Once you’ve saved 1 year’s worth of expenses (Stage 4 of Wealth), it’s time to play the long game:
• Diversify into the Stock Market: Gain exposure to high-growth companies and industries.
• Invest in ETFs (Exchange-Traded Funds): Get broad market exposure with minimal effort.
• Look into REITs (Real Estate Investment Trusts): A passive way to earn from real estate.
Imagine this: your emergency fund is safely parked in a high-interest savings account or insurance policy, while your extra funds are growing in investments that align with your goals. This dual strategy allows you to keep your safety net intact while accelerating your wealth.
Why This Matters
By learning how to transition from saving to investing, you’re on the path to unlocking the next stage of financial independence.
Here’s what that looks like:
• Stage 5: Five Years’ Worth of Expenses Accumulated: Now, you’re ready to take bigger risks and seize life-changing opportunities.
• Stage 6: A Decade of Expenses accumulated : At this level, your investments can fund your lifestyle indefinitely—you’re no longer working for money; your money is working for you.
How to Get Started
If the idea of investing feels intimidating, start simple:
• Begin with Seg Funds or GICs to build confidence.
• Gradually allocate a portion of your savings into stocks, ETFs, or REITs through platforms like Wealthsimple, Questrade, or even through a financial advisor.
Pro Tip: Never invest money you might need in the short term. Your emergency fund stays off-limits, but the money above that can start building your future.
For now, focus on mastering your emergency fund and dreaming bigger. Wealth-building is a marathon, not a sprint—but every step takes you closer to the life you’ve always wanted.
Bonus Resource:
Check out the MITM Vision Casting video to design the life of your dreams and align your financial goals with your aspirations. Remember: the journey to wealth begins with one smart decision. Start now.
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