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Inflation Imposes Setbacks on Canadians’ Ability to Save Emergency Funds

New survey data from LARi Insight reveals that a significant portion of Canadians are dipping into their emergency funds in order to cope with Canada’s rising inflation. While there’s no precise emergency fund definition, an emergency savings fund is an unallocated set of funds dedicated to unforeseen emergencies. It might be a defined component of a financial plan created with a financial advisor, or it might simply be a bundle of savings that normally goes unspent from month to month. The importance of an emergency fund is that it allows Canadian families to cope with the unexpected. Emergency funds are typically held in a savings vehicle that can be withdrawn without penalties, such as a TFSA or high-interest savings account, but it could also be fistfuls of dollars stuffed in a mattress.

22% of Canadians Have Reduced or Stopped Emergency Fund Contributions

With Canadian inflation rising 16.3% between the early days of the pandemic (May 2020) to December 2023 according to Statistics Canada, inflation is putting many emergency fund reserves to the test. Over 1/5th (22%) of Canadians told us they have reduced or stopped contributions to their emergency fund. As such, they are no longer increasing their flexibility to adapt to adverse financial changes. Furthermore, that emergency fund has diminished purchasing power due to inflation. Using the LARi Insight Inflation Calculator, a $10,000 emergency fund established in 2020 would need to be $11,534 to have equivalent spending power today. For someone who held their emergency fund in cash, that’s $1,521 in spending power lost to inflation. And while your emergency funds can be invested in mutual funds or fixed-income investments, it hasn’t been easy to find safe, liquid investments that match or exceed inflation. There is no hard-and-fast rule for how much emergency funds you should keep, but your emergency fund amount will suffer without contributions to keep it in line with inflation.

15.1% of Canadians are Dipping Into Their Emergency Savings To Make Ends Meet

The next group of survey respondents told us they have “utilized emergency savings to cover increased expenses”. This group represented 15.1% of our survey of over 1,200 Canadians. This statistic reveals how dire the impacts of inflation are for a significant portion of Canadians. In order to manage the rising cost of living due to inflation these Canadians are dipping into their emergency savings funds to balance their budget. Dwindling emergency savings reduces their ability to weather any severe financial setbacks such as loss of a job, health issues, or divorce.

11.6% of Canadians Have Increased Emergency Fund Contributions, while 6.6% Have Started Building an Emergency Fund Due to Inflation

In spite of rising inflation, some Canadians are managing to accumulate more emergency savings. In our survey, 11.6% indicated they have “increased contributions to emergency savings”. Another positive: 6.6% indicated they have “started building emergency savings”. Building an emergency fund is a great way to reduce the mental strain of managing your finances. Knowing that cash cushion is there in times of need is good for your mental health. We’ve written 10 Ways to Build an Emergency Fund, and created our Emergency Fund Calculator to help you with your planning.


One-third (33.3%) of respondents indicated no change to their emergency savings. Rounding out the last of our survey responses, 11.3% of respondents told us the question was not applicable to them, choosing the “Not applicable / I do not have an emergency fund.” Among this group we found many of our most financially strained Canadians, those that feel that getting by financially month-to-month is a constant struggle. While there’s unfortunately no quick-and-easy fix to money troubles, we have created resources such as our family budget calculator to assist in planning efforts. Working with a financial advisor can also help with debt management and strategies for addressing and reducing debt.


To further explore the impacts of inflation, try our historical Canadian inflation calculator. To compare the growth of your salary against Canada’s inflation rates, use our Salary vs Inflation Calculator.

The Financial Impacts of Canadian Inflation

Explore our complete coverage, with original market research and analysis from LARi Insight.

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