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Housing affordability remains a pressing issue for Canadians nationwide, with rent-to-income ratios highlighting the challenges renters face in regions ranging from major metropolitan centers to smaller urban areas. As rental costs rise and incomes fail to keep pace, the ability to save for emergencies or long-term financial goals is increasingly out of reach for many.
How much should you save for a rainy day? According to BMO, a good rule of thumb is to have an emergency fund covering three to nine months of your take-home pay. Of course, your target will depend on your lifestyle and living situation. For example, a single person renting should aim to save three months of pay as a comfortable nest egg.
The BMO article highlights that your emergency savings should align with your unique financial situation. Married folks with children and a mortgage should aim to save enough to cover six months of expenses. At the same time, those who are self-employed or freelancing are advised to set a goal closer to nine months to account for income variability.
In her book All Your Worth: The Ultimate Lifetime Money Plan, U.S. Senator Elizabeth Warren introduced the 50-30-20 rule. As explained in Investopedia, this approach divides your after-tax income into three categories: 50% for needs, 30% for wants, and 20% for savings.
Using the 20% savings rule, Zoocasa analyzed Statistics Canada income data and Rental.ca’s December 2024 report to calculate how long a single person can save three months’ salary while renting a one-bedroom apartment.
Saving Up: How Current Rent Prices in Canada Affect Your Emergency Fund Goals
The data highlights a significant challenge: 71% of renters in Canadian cities require up to 24 months to save for an emergency fund, underscoring the extended time needed to accumulate the equivalent of just three months’ salary.
Vancouver, one of Canada’s priciest cities, has the highest rent-to-income ratio at 43.07%. With an average monthly rent of $2,534 and an after-tax income of $5,883, residents have limited disposable income, including how much to save. The average Vancouverite has only $670 if they follow the 20 percent rule. At this rate, building a three-month emergency fund takes a little over two years (27 months), significantly longer than in more affordable regions.
Meanwhile, as the most affordable city, Edmonton shows how lower rental costs can play a key role in achieving greater financial stability.
With an average monthly rent of $1,355 and an income of $6,892, Edmonton’s rent-to-income ratio is a mere 19.66%—less than half of Vancouver’s. Edmonton residents can save $1,107 monthly, enabling them to build a three-month emergency fund in 19 months.
Building an Emergency Fund for Ontarians
In Ontario, saving a three-month emergency fund is fastest in Kingston, Niagara Falls, Hamilton, and St. Catharines, taking 21 months due to lower rents. Kitchener, Oshawa, and London follow at 22 months. Meanwhile, in the Greater Toronto Area, saving a three-month emergency fund takes 24 months in nearby cities like Mississauga and Brampton, while Toronto requires 25 months due to its higher rents.
Renters in St. Catharines benefit from a rent-to-income ratio of 26.7%, which translates to over $7,400 in annual savings compared to Mississauga, where the ratio is significantly higher at 36.66%. Kitchener also offers better affordability, with renters spending 29.86% of their income on rent, leaving them with over $6,200 more annually for savings than Toronto residents. In Ottawa, the rent-to-income ratio is 32%, allowing residents to save an additional $358 each month compared to Toronto, where renters face a much higher burden at 38.19%.
Higher incomes don’t always mean better affordability. Calgary residents earn $6,892 a month and spend $1,634 on rent, with a rent-to-income ratio of 24%. This allows them to save $1,051 monthly and build an emergency fund in 20 months. In Toronto, residents earn less at $6,217 a month but face a higher rent-to-income ratio of 38%, spending $2,374 on rent. They save just $768 a month, needing 25 months to reach the same goal.
The Prairie’s Promise of Affordable Rent and Faster Savings
The Prairie provinces stand out for their affordability, with Saskatoon, Regina, and Winnipeg offering rent-to-income ratios under 25%. In Saskatoon, residents earning about $6,008 a month spend $1,315 on rent, which is just 22% of their income, enabling them to save $940 monthly and build a three-month emergency fund in 20 months. Similarly, Regina residents with a rent cost of $1,285 (21% of income) can save $945 a month and hit their savings goal in the same timeframe. In Winnipeg, despite a slightly higher ratio of 26%, those earning $5,575 and paying $1,440 in rent save $830 monthly, achieving their emergency fund in 21 months. These numbers highlight the financial breathing room available in the Prairies.
Halifax: A Surprising Affordability Outlier
Despite its smaller population, Halifax’s affordability challenges rival Canada’s largest cities. With an average income of $4,875 and a rent-to-income ratio of 40.51%, residents spend $1,975 on rent, leaving only $580 for savings. This means Halifax renters need 26 months to save an emergency fund—on par with high-cost cities like Burnaby (26 months) and Vancouver (27 months). Halifax’s lower income levels compound residents’ financial challenges, highlighting the increasing cost of living in smaller urban centres.
Saving a Three-Month Emergency Fund
Building a three-month emergency fund is daunting for many Canadian renters, especially when balancing other financial priorities like repaying student loans, saving for a down payment, or planning to have children. Even in cities with lower rent-to-income ratios, building this critical safety net can take over 20 months—a resource many will inevitably need.
The challenge isn’t unique to Canada. A 2024 Bankrate survey found that 62% of Americans feel they are falling behind on emergency savings, with only 20% managing to increase their savings this year. By addressing housing pressures, Canadians can create a more stable financial future without choosing between their immediate needs and long-term aspirations.
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