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The article below outlines the importance of having an emergency fund or savings plan in place so that you are able to ride out a short-term financial storm.

by Justin da Rosa | 25 Nov 2016

<img src="manulife.jpeg" alt="Manulife">In its latest survey, Manulife Bank of Canada found that over 1/3 of Canadians will find it challenging to pay their regular bills in 3 months or less, if the household’s main wage earner gets laid off.

The study further found that more than 16% will have problems with servicing existing debts if their current mortgage payments increase in any way (even if their breadwinners continue working), BNN reported.

The results emphasized the risk of insolvency that more and more Canadians, especially millennials, face. 83% of the survey respondents were in the 20-34 age group. Those found to be carrying mortgage debt seem to find themselves facing ever-growing costs and static incomes.

“The survey results [are] more reflective of monthly mortgage costs — which are a function of debt and interest rates,” Manulife Canada Chief Investment Strategist Philip Petursson wrote in the data release.

“Perhaps the emphasis is misplaced on interest rates, given the fact that interest rates are at decade lows, as opposed to the real driver of higher mortgage costs, which is housing prices.”

Manulife Bank officials advised home owners and consumers to consider various options that can help them endure the worst-case scenario.

“A financial buffer or emergency fund is an important part of a financial plan,” Manulife Bank of Canada CEO Rick Lunny said.

“A high-interest savings account is a good option. Or, if you’ve got a home equity line of credit, you could use your savings to reduce your debt and save interest — and still have access to that money if an emergency arises.”

Money Coach John Wright says:
I would recommend you create an emergency fund or savings plan that is equal to at least 3 months of your take home pay. Not sure how to do that? Check out my Debt Eliminator course.