Preparing for unexpected medical expenses: What you need to know

Unexpected medical expenses can strike without warning and quickly escalate into a financial crisis. Situations like this can feel isolating –– yet many Canadians finds themselves in this stress-inducing position.

According to a 2024 survey, nearly half of Canadians (46%) are living paycheque to paycheque, while another survey suggests more than half of its respondents (53%) would need to rely on their next paycheque or a small loan / credit card (36 %) to manage an unexpected emergency.

How to build emergency savings for sudden medical expenses

Preparing for unexpected medical expenses doesn’t have to be intimidating. Begin with small weekly contributions that will accumulate over time (e.g., $25 a week is $100 per month and $100 per month is $1,200 per year) and create a goal of the amount you would like to put aside. Finance experts recommend having three to six months worth of living expenses saved. This should include essential costs such as housing, vehicle expense, insurance, groceries, utilities, and debt payments.

Lowering discretionary spending is another key strategy. Take note of how much is spent on non-essential items like coffee, lunches out, shopping, or impulse purchases. Redirecting some of this money into your emergency fund will help it grow faster. Also, consider your saving windfalls such as tax refund, bonuses, rebates, or even proceeds from a yard sale. These extra amounts can significantly boost your savings over time.

Automating your saving is another great way to stay disciplined. Treat it like any other monthly payment by setting up an automatic transfer into your savings account on payday. By moving the money immediately, you reduce the temptation to spend it. Once your fund is established, it’s important to only use it for true emergencies. If you do need to dip into your emergency fund, make it a priority to replenish it as soon as possible.

Having a clear financial plan also helps in managing both saving and debt. Create a budget to track your income and expenses, and work on reducing your debt by making timely payments and paying off loans or credit cards as planned. Look into potential employer saving plan offers, such as a Tax-Free Savings Account (TFSA), profit sharing, or a Registered Retirement Saving Plan (RRSP), and take full advantage of these options.

In addition to employer benefits, explore savings and investment options through your bank. This can include TFSAs, a Guaranteed Investment Certificate (GIC), or standard savings accounts. It’s also worth researching government assistance programs that may be available to you. With careful planning and dedication, your emergency fund will serve you as a financial safety net, giving you peace of mind.

Early intervention strategies for a healthier future

Knowing you’re financially healthy in the event of an unexpected medical emergency can help reduce stress. However, the best preventative care goes beyond financial readiness and involves maintaining a healthy lifestyle. Similar to starting small when building savings, you can do the same by making little changes in your lifestyle that can go a long way. Here are some proactive measures that can reduce the likelihood of health issues.

Routine check-ups –– Ensure you are regularly visiting a health professional for regular check-ups and screenings such as, diabetes, cancer, and mental health screenings. Speak to a medical professional about ensuring tests are up to date, or whether they’re needed, like blood pressure, diabetes, and cholesterol tests. It’s almost important to visit a dentist as well (the Canadian Dental Association recommends getting an exam every six months).

Substance control –– Eliminating known unhealthy habits is not only empowering but significantly improves your overall health. Discuss with your health care professional options about how to quit smoking and/or reduce your alcohol consumption. There is also a financial perk that comes with quitting smoking. For instance, if you smoke a pack of cigarettes (20 cigarettes) a day with an average cost of $15 –– you could save an estimated $5475.00 a year.

Self care –– Your mental health is vital, and self care a major contributor to ensuring you’re in good standing. Do this by finding something that makes you happy with healthy habits. It can be something as simple as reading a book, treating yourself to a hot bath or a massage (check your health benefits for coverage). This also includes getting active and being mindful about, whether you start by taking the stairs rather than the elevator, trying something new such as yoga or running or walking for 30 minutes. Again, little steps can take you far.

Other partners or sources who can help assist with unexpected medical expenses

According to a National poll conducted by the Leger in 2024, nearly one in four Canadians reported skipping doses, splitting pills, or not filling prescriptions due to cost. This speaks volumes about the issue so many Canadians face –– but it’s important to know, there are external sources and partners can help reduce the burden of medical expenses, such as pharmacies.

Pharmacists for instance can recommend cost effective generic medications instead of higher priced branded alternatives, which can lower costs for both patients and the healthcare system. Some pharmacies may even offer mail-order prescriptions which can also reduce costs or use extended prescriptions (90 days) to reduce co-payments.

It’s also worth noting that there may be regional charities and other organizations that can offer support with covering costs.

Government programs can also play a critical role in helping manage medical expenses. Provincial pharmacare programs offer public drug plans that assist with the cost of prescribed drugs and medical devices, with specialized options for seniors, cancer patients, and those in palliative care. The Canadian Dental Plan can also provide coverage for qualifying residents. To learn more, you can visit the Government of Canada website or consult with your dental office to determine eligibility and available coverage. 

While unexpected medical expenses can be challenging being prepared is essential. By taking advantage of available resources maintaining financial discipline and staying informed about assistant programs, individuals can better manage the financial impact of unforeseen health related costs. Consult with one of our Licensed Insolvency Trustees for a Free Confidential Consultation to explore your options for improving your financial health –– with a solid plan in place you can approach these situations with greater confidence and a sense of security.