The past 2 months have been traumatic for many Canadians. In addition to the health risks, up to 44% of Canadians said they or someone in their household has lost work because of the economic downturn.  Fortunately for most of our clients, they were able to keep working at home, so their income continued.  And with being home all the time and with stores closed, many have seen their bank balances increase in March and April.  I realized that we went 38 days between filling the tank of our van (instead of 3X/month), so we have been saving on gas. Without vacations, dental/chiro appointments, visits to restaurants, kid’s activities, etc… balances have been increasing rapidly.  Our neighbors had to cancel their 25th wedding anniversary trip so they have extra cash in their bank account. If you are lucky enough to be in this position where would it be good to put the money especially considering there is still lots of uncertainty ahead?

Build your emergency fund:

A top priority that has become even clearer for me for all clients is to have an emergency fund.  The recommendation has been for anywhere from 3 to 6 months of living expenses.  Some people are more comfortable with more, and some with less.  In all cases it is good to have this in high interest savings so there is no cost to take out, the money will grow a little and is protected. And with the uncertainty right now having extra cash beyond that isn’t a bad idea.

Pay off debt:

Once you have a solid emergency fund, it is good to tackle your debt.  By paying off debt you will get an immediate rate of return.  For credit card debt this can be savings of 20% by paying it off.  All of Canada’s big banks said they will temporarily lower credit card rates from 20% to about 11% for customers who have been approved to skip mortgage payments.  Paying off debt also reduces your expenses which can be beneficial for the future.

Increase your investments:

If you have continued certainty with your job, lots of savings and no debt then it would be good to look at investing more into the markets right now.  Things have bounced back nicely from the March lows, although it is very possible things will go down again, so I would suggest dollar cost averaging which you can do by increasing your current savings or starting some new savings.  Over the long-term stocks go up and you’ll be happy with your returns.

If you need any help or have any questions let me know.

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