Pattie Lovett-Reid: How to build a cash reserve in times of crisis

Pattie Lovett-Reid: Tips for building a cash reserve The Canadian Payroll Association has found 43 per cent of the population is living paycheque-to-paycheque. For many, a rainy day fund is out of the question but for others, a few minor changes can set them up for financial success when they're thrown a curveball. CTV's Chief Financial Commentator Pattie Lovett-Reid explains.

TORONTO — There are many Canadians living close to the margin. The Canadian Payroll Association has found over the the years that roughly 43% of Canadians are living paycheque to paycheque. For many, even if they wanted to tuck some money aside for an emergency fund it is simply out of the question. However, there are others who, with a little tweaking, just might be able to set themselves up for financial success when thrown a curveball.

COVID-19 has taught us many things and a standout for me is the need for an emergency fund with at least 3-6 months living expenses set aside in cash in the event a crisis strikes when you least expect it. Sure this is ideal and saving for it doesn't happen overnight.

Is this a reasonable expectation? I believe so, with a little tweaking.

I've always been a fan of paying off high interest credit card debt as aggressively as possible. However, for those who on a monthly basis are straddling the break-even line, I might alter my approach a little.

Here is why, cash is king right now.

Having a little cash can prevent a challenging financial situation from spiralling completely out of control. I'm not talking about 3-6 months living expenses but I am talking about $500 - $1,000 in cash available to you.

How do you go about building this cash reserve? Here are a few ideas. This might cost you in the long run but a financial lifeline is about staying afloat right now.

There is one more trick that we have used in our household. Break down your day into sections. For example, don't spend any money from 6:00 a.m. to 12:00 p.m. and take the money you would have normally spent on coffee, snacks or even an unnecessary purchase and immediately transfer it to your emergency fund. Do the same thing in the afternoon. You get where I'm coming from. Small amounts can lead to big changes and before you know it you will have a financial cushion that can get you through a difficult situation when you least expect it.