[dcaron]

I worked on a few emergency "income reducing" scenarios this week-end, should either my wife or I lose our jobs. In calculating the amount of emergency fund required to cover the base essentials, should we consider the amount supplied by employment insurance?

We live in Quebec. We have no kids yet but planned to within the next 1-2 years.

Our monthly essential expenses are around $4200/month. We bring in around 7200/month net.

By order of magnitude, we are dividing spare money towards debt (Mortgage prepayments & HELOC & Personal Loan), savings (TFSA for short term emergency fund & Employer Share purchase program & Mutual Fund RRSP) + non-essentials.

Thanks for any comments/suggestions.

 

[FrugalTrader]

We count EI as part of our emergency fund, but make sure to account for the deductible period (first two weeks).

 

[investnoob]

I think its important to remember that job loss is not the only emergency you should be planning/saving for.

I am saving three months expenses, not because I think there is a risk I might lose my job (it is very secure, I am a government employee), but because other emergencies may come up.

For example, if there is a death or illness in the family, I have the ability to take three months off to help. That is just one example. Hope this helps.

 

[dcaron]

We count EI as part of our emergency fund, but make sure to account for the deductible period (first two weeks).

Good point! I will factor that in. Thanks for your reply.

 

[dcaron]

I think its important to remember that not job loss is not the only emergency you should be planning/saving for.

I am saving three months expenses, not because I think there is a risk I might lose my job (it is very secure, I am a government employee), but because other emergencies may come up.

For example, if there is a death or illness in the family, I have the ability to take three months off to help. That is just one example. Hope this helps.

That is so true. We have aging parents. My girlfriend went through caregiving for her folks for a few weeks each, two years in a row. Her folks live 500Kms away from us. My GF's boss was nice enought to let my GF take some time off, and work remotely from her folks home.

We are very fortunate that both of our jobs (totally different fields) allow us the flexibility to work from home (all of the time for me, occasionally for her).

I also have 125K RRSP's which I can pull from (only in case of prolonged reduced income to lessen tax hit), and an unused unsecured LOC (0K balance on a 30K PLOC @ 5.75% APR) which I can use (but I would would hate to dig myself deeper into debt).

Im leaning towards faster debt repayment, and smaller Emergency Fund funding. I realize there is a risk of diminishing my nest egg, but I cant help but think about the interest fees iM being hit with on my rather large new-born mortage.

While I work at pre-paying our mortgage, Im making more room on my HELOC, which could be used as an EF.

 

[CanadianCapitalist]

I'd count EI in planning to survive a job loss. I'd also include severance benefits if the employer is relatively healthy. Also, don't forget that you *may* be able to cut out some major job-related expenses such as day care.

Like other posters have pointed out, building an emergency fund is worthwhile in any case even if the potential for a job loss is low.

 

[Mockingbird]

Just a word of caution here. Job loss does not automatically qualify you for an EI. Your claim can be disallowed for many other reasons. It is never a guarantee.