This post is a continuation of a series I've written on using GIC Laddering for your Essential Expenses Emergency Account. You can read the first post here and the second post there.
You've been saving for your Essential Emergency Expenses Account for some time. But you're not to the big goal of $25,200 just yet.
There are may ways to boost this account. Ask for some overtime. Sell some of your stuff that you no longer use. Maybe you've paid off one or two of your debts, and for a short period of time, you use those payment amounts to add value to your EEE Account. You could challenge yourself to only spend half of your variable budget and put the other half toward this account. Pick one thing, any thing, and give it your 'gazelle-like intensity' for one month, and see what you can do!
You can start your ladder in one of two ways.
You could buy one GIC, set it to mature every 90 or 180 days. When it matures, you add more funds to it that you have set aside, then get another 90 or 180 day GIC. When you reach the desired amount, or $2100, start with another GIC.You don't have to wait until you have a full months worth of expenses to start using GICs. You can get a GIC with no minimum deposit. All you really need to do is check around for rates and compare.
Another way to do it would be to divide the amount you already have set aside, and divide it by 12. Each month, you would get a GIC for that amount, plus any additional monies you have set aside in the last month, with a maturity date of 1 year later. In month 13, after the original GIC matures, you add money to it that was set aside the previous month. Following the same routine each month, you are adding to each and every GIC, plus rolling over whatever interest you have earned thus far on that GIC.
Here is where our hypothetical GIC ladder goes into the future.
You've saved diligently and have several (or all) of your monthly expenses set aside.
You would have 12 GIC's, each one for the amount of one months worth of expenses, or $2100. Each one would be set to mature after 12 months, so you would have one months worth maturing on any given month during the year. If you have enough income to last you for the month, reset the GIC to mature in another 12 months. Lather, rinse, repeat!
What happens if you lose your main source of income? You know you have a months worth of expenses in a GIC set to mature within 30 days or so. You take the money out and live on your reduced budget while you are job searching to replace your former income.
This method of setting aside funds becomes a sort of self insurance. Your worries of a devastating financial loss are lessened because you know you will be ok. You will make it through. Having this money set aside buys you the time you need to find another source of income. You may have to make drastic changes to your lifestyle in order to live on these funds, but you will sleep easier at night. That my friends, is what makes it all worth it!
Side note: If you never have an income loss that requires you to dip into this savings, you will have a large chunk of money that can be incorporated into your retirement expenses when you move on to the next phase of life.
This is of course an illustration of how one could have their Essential Emergency Expenses Account in a GIC Ladder. It is an idea that I would like to achieve personally for my own family. I'm saving small amounts to add to our EEE Account in our ultimate goal to have $26,400 for 12 months worth of expenses.