I received this gem in the mail today from BMO, aren’t I lucky?
I think the best part of the letter is that they’re going to give me $10K for planned and unplanned expenses and they’re encouraging me to deal with these in a way that suits [my] lifestyle and makes smart financial sense.
Hold the phone. Taking on a $10,000 line of credit is a useful alternative to an emergency fund of cash savings? Uh, no. See almost everything Gail Vaz-Oxlade has ever written. It’s an easy way out. It’s also an easy way to get into more debt while coping with a family emergency or job loss. After such a traumatic event, do you want to be worrying about paying your minimum LOC payment? No.
Combine that with the fact that consumer debt in Canada hit an all time high this quarter (since TransUnion started tracking the info in 2004), AND that a CIBC poll revealed that an alarming 45% of Canadians have no emergency savings, and you have a recipe for disaster.
There was a time in my life that I was seeking a line of credit to borrow from (& repay the week after, when I got paid), and I was denied by BMO (for a lower LOC limit) because I didn’t have enough assets to borrow against. Now they’re throwing it at me without the slightest knowledge of ANY of my assets. Seriously, they know nothing!
So, if you have an emergency fund set up with just $100 in it for unexpected expenses, you are already miles ahead of 45% of the Canadian population. Doesn’t that feel good?!