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The Benefits of Multiple Emergency Funds, with Alyssa Davies

Presented by Wealthsimple

Welcome to The MapleMoney Show, the podcast that helps Canadians improve their finances to create lasting financial freedom. I’m your host, Tom Drake, the founder of MapleMoney, where I’ve been writing about all things related to personal finance since 2009.

Does dealing with your finances cause you anxiety? If so, how do you handle it? My guest this week has a clever approach to conquering money-related anxiety – multiple emergency funds.

Alyssa Davies is a content manager for Zolo and the published author of The 100 Day Financial Goal Journal. Her newest book, Financial First Aid, is in stores on May 3rd. Alyssa is also the founder of the two-time award-winning Canadian Personal Finance Blog of the Year, Mixed Up Money. This week, I sat down with Alyssa to chat about her unique approach to emergency funds and the complicated relationship between our emotions and our bank account.

Alyssa explains why she separates her emergency fund into several different categories. For one, not having all of her short-term savings lumped together aligns her money to a specific purpose, giving her a feeling of control over the unexpected. Alyssa also says that her unique way of organizing her finances has reduced her anxiety levels.

But just because Alyssa has multiple emergency funds, doesn’t mean she is storing huge sums of cash. Her advice is to only keep what you need for emergencies, as you don’t want too much cash on the sidelines, uninvested.

Do you prefer to invest in socially responsible companies? If so, our sponsor Wealthsimple will help you build a portfolio that focuses on low carbon, cleantech, human rights, and the environment. To get started with Socially Responsible Investing, head over to Wealthsimple today!

Episode Summary

  • Alyssa explains why she has multiple emergency funds
  • The benefit of splitting up your emergency fund into separate categories
  • How much should you put in your household emergency fund?
  • How Alyssa’s anxiety has made her a better planner
  • Our money and our emotions are closely linked
  • For some people, a line of credit can serve as an emergency fund

Read transcript

Does dealing with your finances cause you anxiety? If so, how do you handle it? My guest this week has a clever approach to conquering money-related anxiety—multiple emergency funds. Alyssa Davies is a content manager for Zolo and the published author of, The 100-Day Financial Goal Journal. Her newest book, Financial First Aid, hits stores on May 3rd. Alyssa is also the founder of the two-time award-winning Canadian Personal Finance Blog of the Year, Mixed Up Money. I sat down with Alyssa this week to chat about her unique approach to emergency funds and the complicated relationship between our emotions and our bank account. 


Welcome to the Maple Money Show, the podcast that helps Canadians improve their personal finances to create lasting financial freedom. Do you prefer to invest in socially responsible companies? If so, our sponsor, Wealthsimple, will help you build a portfolio that focuses on low carbon, cleantech, human rights and the environment. To get started with socially responsible investing, head over to today. Now, let’s chat with Alyssa… 


Tom: Hi, Alyssa. Welcome back to the Maple Money Show. 


Alyssa: Thanks for having me, Tom. 


Tom: You’ve got a new book out now. An interesting thing you had brought up in it (which I’ve never heard said quite this way) is that you have multiple emergency funds. Can you just start us off with explaining how this came about? 


Alyssa: Yes, absolutely. Interestingly enough, I was writing a different book before I pitched this book. I actually pitched a book about home ownership. And then the pandemic happened. Everything shifted in my life as it did for every Canadian I know. And immediately, I knew I needed to write a different book for my loved ones and friends who are experiencing job loss, experiencing financial abuse for the first time, not knowing what that was or how to manage those types of situations. So I switched gears because my editor thought it was really interesting how I manage financial emergencies. I have multiple emergency funds. I do it this way because I have terrible anxiety. I have high-functioning anxiety and I have a really difficult time with a lack of control. Any way I can find to take that control back, to give myself a little bit of peace of mind, is the goal. When I started to compartmentalize my financial emergency funds, it changed my life because every dollar I saved had a purpose. It also made it a lot easier to spend the money when an emergency did happen. That was why I have a few emergency funds, which sounds silly, but there is a good reason. 


Tom: These are all truly emergency funds then, right? Because we’ll get similar advice out there where they say to have a separate fund for saving for Christmas or something. But these are actual emergency funds? 


Alyssa: Yes. And the ironic thing about emergencies is most of them are planned expenses. We just choose to ignore the fact they will inevitably happen. They are emergency funds in the sense that I have one to protect myself from maybe being in a toxic work situation or maybe something happens in my relationship, so it’s completely separate from my partner. He knows about the account because we’re very transparent about our money. But I think it’s always good to have that safety net because you never know what might happen in your relationship, no matter how solid it is. My second one is fund for our home—the four walls around us because those are the planned expenses that will happen. You will have to make repairs. Your appliances will break down. You’ll need to update your roof at one point. So that’s the second one. And the third one is just our family fund for everyone. If something happens, a medical emergency or one of us loses our job tomorrow, we have backup plans for all of those scenarios. 


Tom: It sounds like these separate emergency funds are more permission-based than saying this is the car emergency fund or something like that. Is it, who does this emergency fund belong to kind of thing? 


Alyssa: Yeah. 


Tom: I guess the middle one was sort of house-based. But still, it seems more like it’s almost a permission thing, as though it’s okay to spend it for this need. 


Alyssa: Exactly. I love that you say the permission because with many of my readers, that’s the biggest issue for them. They’ll save all this money, they’ll hoard money, and then they’re scared to spend it because that’s their only security blanket. When you compartmentalize those three funds, it’s easier to give yourself that permission to say, “Okay, my car broke down. I already have the money saved in my family fund, so there are no worries here.” Whereas if it’s all just one big fund, it feels like a huge hit if you have to take out half of it in one day. 


Tom: It also feels like when you hear the advice to have an emergency fund of three months, six months, a year, it’s hard to drag that down at all because a car breaks down or something so I like this idea of splitting it up and having that ability. You mentioned that a lot of these emergencies are really planned. A car breaking down would be a great example. Do you save up a little more in there then knowing that? Because, depending on the age of your car, these are things you can expect at some point. Like my car is getting on now. It’s great. I don’t have car payments or anything like that. And actually it’s been a great car for a decade now with nothing needing fixed. But the older it gets, you’ve got to expect this stuff happening. So do you kind of adjust these totals based on that? 


Alyssa: Yes, that’s a great question. The three to six months is great advice. It makes sense to have that kind of cushion, especially when you’re talking about if you lose your job. The thing is, though, not always does every emergency give you a break in between each one. That was what the pandemic really revealed. You lost your job but that doesn’t mean the rest of the potential emergencies that might happen will stop. If you’re off work for three to six months, you still might need more of that money for everything else. If your three to six month fund has essentials covered, it doesn’t really have anything extra in there for those scares. I like that it’s the amount that I keep in my family fund because that is specifically for job loss. My personal fund—which is just for my emergencies is a lot smaller because the other issue is you don’t want a lot of money just sitting on the sidelines doing nothing. It’s wasteful. And you still need to be worried about investing for your future. So having money just sitting there doing nothing, even if it’s in a high-interest savings account, is not enough all the time. Mine is just small enough to get me through if I needed to quickly get cash out because, say, my husband unexpectedly passed away and I couldn’t access one of our accounts, then that’s there for me and I don’t need to stress about that happening. The household one, interestingly enough, I actually spoke to Ramona King. She has the book, House Poor, No More, and we spoke a lot about how to determine how much do you actually put in your household emergency fund because there’s so much variance in the advice you get. A lot of the advice is based on how prices used to be for a house. It used to be, you should save one to three percent of your home’s value. But as we know, the value of homes right now is exceptionally high. That’s when we started realizing how much money you’d be leaving sitting on the sidelines if you’re saving that much money for a household emergency. Whereas if you’re just saving one to three percent of how much you spend on home maintenance every year, per month, then you’re actually saving enough. You won’t spend all of that every single month so you’ll start to build a fund, but you’re also not over saving. There’s definitely a lot of factors you need to vary in when you’re making the calculation of how much you actually need to save in every fund. The problem with me saying I have three emergency funds is people will assume I have extremely high amounts of money saved on the side doing nothing. And that’s not the case at all. It’s just having that little bit of security that you need for those emotional reasons—for my anxiety and for how scary money feels already, before even having to worry about all of these inevitable emergencies. 


Tom: I want to get more into the COVID and anxiety parts but you mentioned with the house fund, specifically, that it’s sort of based on maintenance. What about the other two funds? Do you suggest anything like the three months, six months, anything like that? How do you explain this to someone that’s just looking to start? 


Alyssa: For the family fund, for the job loss situation, it’s based mostly on our “barebones” essential budget because we are a dual-income household. If one of us loses our job, we still have one stream of income so it’s less of a stressor. But that’s exactly the thing—you need to know all of those factors. If you’re a homeowner, you’re going to need more money saved. If you rent, you’ll need a little bit less, potentially. It also varies on what type of vehicle you drive. I have a leased, new vehicle, so that’s not a worry for me. It’s in great condition and I don’t feel like I need to be saving an extra amount of money on the side. Then it’s varying on whether you have kids. That’s another thing to worry about. All of those kind of factor in. But at the end of the day, it’s looking back historically to see how much you’ve spent over the past three to six months on average. Then, what is the absolute “barebones budget” you can afford to live on every single month, because any more than that might be putting too much money on the sidelines. 


Tom: When you say bare bones, do you mean if someone loses a job, what can you do without? You could say the Netflix and the lattes—I know those are small things, but there’s probably certain things you could exclude. You don’t have to look at your total spending six months back. 


Alyssa: Yes. And it’s also what barebones means for you? If you want to live the same lifestyle if you lost your job, then you save for that. You don’t have to sacrifice those things if that’s not something you want. It’s just about how much money you’re willing to put in that fund. 


Tom: Yeah. Yeah, true. With the personal one, how do you structure that? Is that a month-based thing or just some random total? What felt right for you there? 


Alyssa: That one was kind of just a feeling of, this would be enough for me if I needed to leave and go live somewhere for a month. It sounds super-silly. I feel people think I’m insane for having a separate account for my husband because we have a great relationship but I’ve gotten a lot of readers messaging me saying that their partner maybe had some kind of mental health issues and things started to get really distressed in their relationship. I like to remind people, though, no matter how long you’ve been with someone, the more time goes on, the more you change and evolve as a person—whether you’re evolving together as a couple or as individuals, you never know. So, protecting yourself in those moments is super important because one thing a lot of people don’t realize, particularly women, is that even if you have a credit card with your partner, a joint credit card, if you are not the primary card holder, you’re essentially screwed. You can’t do anything if you need to access that card and they’re not able to be there to take the call. Little things like that, a lot of us forget about—why it’s so important that both of you have a stake in your relationship with money and how you manage that money in your household. Because one of my friends experienced a financially abusive relationship throughout the pandemic (and is now safe and removed from that) we had a great conversation about what’s life going to look like when you can now afford to be on your own? After that conversation was when I made the decision of how much should be in that account. 


Tom: I really like that. Even with couples, you got to remember, you’re both individuals still. You also used the example of if he were to die—you still need to remember you’re an individual person. The credit card is a great example because you need the other person on the phone call just to get it approved. Maybe you’re travelling and they freeze up your card— 


Alyssa: Yes! 


Tom: That’s a hassle. But it’s also your whole credit history, your credit score kind of thing. You want to make sure you have something you’re using—and existing financially. That you’re not just an add-on.


Alyssa: Yes. I even spoke to someone the other day. She and her husband were in a really difficult spot in their relationship. Just out of nowhere, when she thought everything was fine and they were working through things, he drained their accounts. He drained the accounts, switched the mortgage over to his name and everything in one day. Just 24 hours completely changed her life and she had to adjust on the fly. She didn’t have her own backup plan. It’s stories like that, that no one wants to hear. A lot of the stuff I’ll talk about in the book, no one wants to hear—that it could potentially happen to you because you never assume the worst (unless you’re me because I have terrible anxiety). But most people don’t assume the worst. They assume everything will be okay, and even if something happens, they’ll get through it. But what you do need is to have that safety net, especially if you want to continue accomplishing the financial goals you’ve set forth for yourselves and seeing yourself as a financially successful person in the future because that’s what we all want. 


Tom: Yeah. My friend Jimmy at Retire Happy has brought this idea up before—that in retirement you have to remember you’re separate people. You’re going to retire separately. You’re going to die at different times, hopefully—well, not hopefully, it’s just very unlikely. I realize, at that point everybody needs their own retirement accounts and stuff. But I never thought about it just in a day-to-day way. You mentioned your anxiety—and, obviously, you don’t want anxiety, but it’s sounding like it’s made you a better planner? 


Alyssa: Yes. I mention that in the book. I was talking to Sara Lee Kane about how anxious I am and she said I should reframe that because it can be really beneficial. You can have a better idea of what you need and want when you lean into that—that anxiety. And I agreed. That’s a great way of looking at it. 


Tom: I do like that because I’ve seen that with my kids. I’ll point out something like, “If you keep doing that, you’re going to hurt yourself,” and sure enough, 30 seconds later it happens. They wonder how I predicted this. And I say, “Well, I pictured the worst thing happening. And you did something up to that point…” Obviously, you don’t want anxiety. There’s a whole lot of other issues around that but it’s probably made you come up with some interesting ideas with these emergency funds. 


Alyssa: The funny thing, too, is before I knew I had anxiety, I assumed everyone thought the same way as me. I just assumed that was how you just explained. As a parent, when your kids are out playing, I just assumed everyone was thinking this was going to go wrong, and this is going to wrong, and this is going to go wrong. My husband would say, “No, no, no. That’s really weird because I don’t think like that at all.” And I’d think, hmm, maybe I should talk to someone. The other thing I’ve been able to recognize since day one—when I started to actually care about my money and how it’s directly tied to emotions, and how everything we do with our money, how we spend our money and save our money is impacted by the way it makes us feel—how we grew up, how money was spoken about in our households and whether we have money trauma—which almost everyone I know has somewhat (whether they realize it or not), it’s really good to be able to identify how those things make you feel and what they can make you do with your money or what you should be doing with your money. 


Tom: I was joking a bit about how you’ve been a great planner, but do you ever get concerned that maybe you’re over-preparing? Did you ever consider extra emergency funds beyond the three? Did you have to rein it in at some point? 


Alyssa: Yeah. I’m always having to rein it in. Ironically, though, the money is the one place that I no longer have worry about because I have these emergency funds. I still worry about little things that everyone worries about. Like maybe I need to make more money so I can pay for the things I want in the future. But I don’t worry about losing my job tomorrow. I don’t worry about that anymore. It’s not something I think about ever. And I don’t ever think about what might happen if something really bad happened in my relationship today. I just don’t think about it. Money’s not an object when those things appear in my mind. And that is the power of those emergency funds. Whereas, in my day-to-day spending and stuff like that, there are still things I’m working through. There’s still the issue of feeling the scarcity—the scarcity of never having enough no matter how much money I make. I’ll never feel like I make enough. I don’t think it’s easy to just work through your money issues, (especially something like financial anxiety) and just be able to move past it. But if there’s something you can do small, like having $1,000 on the side that can kind of prevent those everyday intrusive thoughts, then that is the real win for me.  


Tom: That’s interesting. Earlier in the episode here I was getting you to give the usual number of months and stuff, but it’s almost like what’s it take for you to feel secure, right? Obviously, when you start out you’re starting from zero if you don’t have an emergency fund so to worry about if it needs to be six months or 12 months is less relevant. It needs to be more than zero. I like the idea of starting out and then maybe just working up to what’s comfortable. 


Alyssa: Exactly. And I’ve asked followers that—what would make you comfortable? If you’re so concerned and feel like you’ll never have that sense of security, then what number would? And they always say around $1 million. But you need to have some kind of realistic and tangible number. You can’t just make up something like $3 million. Really sit down and ask yourself what a realistic number is that would give you some sort of comfort? You may never feel 100 percent comfortable in your financial life based on your history with money. Maybe you grew up in poverty. Those things are really hard to get past. But if there’s some specific number you can kind of conceptualize in your mind to give you that feeling of security, then you need to find that. You can’t really think about the three to six months or specific rules. everyone wants a rule so that they can feel secure with their money. And it’s not about rules. It’s about your feelings and how it makes you react in certain financial situations or when you have to make financial decisions. 


Tom: Do you think this three emergency fund set up works for everyone, or could there be different situations? I don’t know everybody’s life situation, but do they need to look at it differently sometimes? Are there other examples that maybe affect people differently? 


Alyssa: Yeah, I think one great one too is, some people are way more comfortable with risk than I am. If your risk tolerance is higher, you might not even feel like you need that emergency fund for your household. Maybe you are comfortable with using a HELOC, line of credit or credit card to save you in that need. But it’s totally about whether or not you manage that feeling of knowing you owe someone money because of something that happened that you could have been prepared for? It’s kind of like asking yourself, “Am I comfortable with risk or am I okay just existing?” 


Tom: I like the idea of comfortable. I’ve  tried to say this before on the podcast and it always felt wrong. But a line of credit can work as an emergency fund. Obviously, there’s all sorts of risk to that. It could be a downward spiral where you don’t have a job and now you’ve got debt. I get all that— and still fully suggest that everybody has an emergency fund. But when you’re at that $0 emergency fund—just getting started, if you can apply for either HELOC or just a regular line of credit, apply for it while you have a job. Let it exist because when you really need something like that, you’re not going to get it. You can’t say, “Oh, I’ve lost my job. Can I get a line of credit?” No, it’s not going to happen. I do like it as a form of safety net. I fully think everyone should have an emergency fund. But something like a line of credit (and to a lesser degree, credit cards), I don’t think anyone should be using those when they’re jobless. But just the idea that you have access to credit is kind of part of that planning as a truly “last case” scenario. 


Alyssa: And that’s another thing, too, your credit card shouldn’t be maxed out because when you need access to that money, it should be there. Another good one that a lot of people forget to consider is, if you’re in debt do you still need to have an emergency fund? And should they be saving for that emergency fund while they’re paying off their debt? Yes, you should. Even if you’re in debt, emergencies don’t stop. They will still happen. You’ll actually, probably, be worse off because you’re behind on your debt repayments because you had to prioritize this financial emergency, even if it’s just small. When I was paying off, I was only putting $20 a week into an emergency fund and it felt like I was making zero progress because emergencies kept happening and I kept draining the fund. For some reason, it seem like you’ll have more emergencies when you’re in debt because you’re already living so tight with your income. But it worked. Eventually, I paid off my debt and I never had to miss a payment. In fact, I never had to miss doing those extra payments that are what got me out of debt so quickly. Just making sure you have those decisions made. Another thing too, it’s another emotional decision—how much is this debt weighing on you? And is it better to prioritize that over something else? But having the emergency fund, again, is the best option because it’s going to save you in those moments of panic. 


Tom: Yeah. And it sounds like even when you’re starting off with a small emergency fund, it’s kind of that pay-yourself-first thing. You’re putting that money aside. You’re also paying down your debt. But it’s just different because when I was paying off my debt, when I was in my 20s, I had no emergency fund and I was doing exactly what you said where I was moving forward (which is good). I was paying down the debt, racking it up a little bit with whatever expenses came up that month, paying it down. I was a forward movement, but it was slow. It’s like my credit line was kind of my bank account in a way. All the money would go to the payment because, basically, every dollar is reducing the interest I’m paying. But then I was pulling the money out to actually get through the month. 


Alyssa: One of the first financial emergencies that has stuck with me forever is when I was in consumer debt. My credit cards were maxed out. Every paycheck, I would pay the minimum amount so that I would have enough to buy more groceries or do whatever I needed to do that month. I got my wisdom teeth removed one weekend and I couldn’t afford gauze to put in my mouth. It was this moment of pure shame, guilt embarrassment. How can I not afford to make a $6 purchase when it’s a necessity? 


Tom: Yeah. 


Alyssa: That emergency fund is what’s going to prevent you from those feelings. Those feelings are really hard to kick and get rid of once you’ve experienced something like that. I still deal with scarcity mindset to this day, even though I’m very financially secure. 


Tom: So now that you’ve gone through this, everything from being very anxious to feeling more secure, how would you describe the change? I’m hoping you’ll connect with someone that’s listening to this because, how you mentioned you don’t notice your anxiety is unusual (because it’s just what you’re used to), how can someone see this in themselves and where they could get to? 


Alyssa: I think the very first thing is the “awareness” piece—being able to identify how you’re feeling when you’re feeling a certain way. I was absolutely terrible at that. The first therapy session I ever had, my therapist said, “You’re great at feeling anger, but we need to work on all the other emotions.” So, I’ve really, really worked hard at being able to put a label on something when I’m feeling it, especially when it comes to when I’m spending money because I love to spend money. I took that all away when I paid off my debt. But then I was scared to spend money. It’s like this roller coaster of knowing what the next step with your financial life is going to look like but continually being able to say this is what that feels like and I’m comfortable with that because I have labelled it, I’m leaning into it, and then I’m moving on—moving past this part of my life. I’m no longer going to exist in a state of scarcity. Just identifying those things and being aware is such a game-changer. I think that is a progression we all get to go through when we start to take control of our money. 


Tom: I think—even though I didn’t need it, just mentally, this whole COVID situation has made me so much more aware of the benefits of emergency funds. I’ve said on the podcast back when COVID happened, I can’t even imagine being a single mother that’s a waitress back when all that happened… Your kids aren’t in school. They’ve been sent home. You’ve lost your job. There’s so much that can happen all at once. It was something that didn’t seem imaginable before this—that everything could kind of just fall apart at once. I think if someone doesn’t have an emergency fund and they have this anxiety, they should really look into this. Thanks for coming on the show. Can you let people know about the book and where they can find you online? 


Alyssa: Yeah, of course. Thanks for having me. I love chatting with you, always. Anyone can find me at Mixed Up Money on every single social media platform. My website’s and the book, Financial First Aid, comes out May 3rd, so it’s probably out right now, during this. You can get it at any major book retailer—wherever you choose to shop. 


Tom: Great. Thanks for being on the show. 


Alyssa: Thanks for having me. 


Tom: Thank you, Alyssa, for being willing to chat about the very real problem of financial anxiety and how emergency funds can help. You can find the show notes for this episode at If you haven’t yet, head over to our YouTube channel and subscribe there as we’re beginning back to releasing never-before-seen content, soon. Search for Maple Money of go to and subscribe today. As always, thanks for listening. I look forward to seeing you back here next week when Brighton Gbarazia shares what the banks are not telling us about our mortgages. See you next week. 

Most people don’t assume the worst, they assume that everything will be ok and even if something happens they’ll get through it, but what you do need is to still have that (financial) safety net… - Alyssa Davies Click to Tweet