The week my fridge died and the air conditioner quit in the same 24 hours, I learned exactly what “no cold food in a very warm house” feels like. Groceries spoiled, repair quotes piled up, and the temperature climbed—fast. It wasn’t a financial disaster, but without a cash cushion it would’ve been a credit-card crisis; with one, it was an annoying Tuesday I could solve.

That’s the point of a Sleep-at-Night Fund: not the biggest pile of cash, but the right-sized buffer—kept in the right places—so when life jumps the tracks you can pay the bill, keep your plans intact, and sleep in a house that’s cool again.

What it is (and isn’t)

A Sleep-at-Night Fund is your personal buffer: accessible, stable, and intentional. It’s not “whatever’s left in chequing.” It’s a deliberate amount set aside so surprises—job changes, dental bills, a short-term market dip—don’t force expensive, stressful decisions like credit-card debt or selling investments at a bad time.

Three qualities to aim for:

1. Accessible — available within days, not weeks.
2. Stable — minimal market risk.
3. Intentional — sized for your life, not a generic rule.

How much is enough? Use the tiered approach

Forget the one-size-fits-all “six months for everyone.” Your number depends on your income stability, household setup, health, and upcoming goals. Start with this simple tiered model and adjust.

Tier 1: Monthly Buffer (1 month of core expenses)
Purpose: everyday smoothness. Keep it in chequing or an instant-access high-interest savings account (HISA). This stops “life friction” from becoming debt.

Tier 2: Shock Absorber (2–5 months of core expenses)
Purpose: actual emergencies and near-term surprises—car repair, short job gap, a family flight. Keep this in a HISA or cashable/short-term GICs (30–90 days). Most households land here.

Tier 3: Bigger What-ifs (6–12 months) — for some
Consider this larger cushion if you’re self-employed, commission-based, a single-income household, supporting dependants, or planning a big life change (new baby, move, career shift). Park it in laddered GICs or T-Bills so part of it matures every 1–3 months.

Adjusters:

• Stable dual incomes + strong insurance: you might live happily at Tier 2.
• Variable income, caregiver duties, or health uncertainty: lean toward Tier 3.
• Known big expenses in the next 12 months: add those on top (property tax, roof, tuition).

Quick math: If your core monthly expenses are $4,000, Tier 1 is $4,000; Tier 2 (three months) adds $12,000; Tier 3 (another six months) would add $24,000 for a total of $40,000. Then layer in any planned big costs.

Where to keep it (and why)

Chequing (only for Tier 1): instant access, but low/no interest—don’t store more here than necessary.

High-Interest Savings Account (HISA): your workhorse. Daily liquidity, straightforward interest, no drama. Ideal for Tier 2.

Cashable or short-term GICs / T-Bills (30–180 days): slightly better yield in exchange for minimal access limits. Great for Tier 3 and for laddering maturities so cash reliably “rolls off” each month or quarter.

TFSA vs. non-registered: If you have TFSA room, holding part of the fund there can shelter interest from tax. Just remember: accessibility first. Avoid tying up your emergency cash inside RRSPs (withdrawals can trigger tax and reduce room).

Multiple “buckets” help behaviour: Some clients like separate HISAs named “Buffer,” “Travel,” “New Roof.” Labelling reduces the urge to dip into the emergency bucket for non-emergencies.

Don’t let cash quietly lose ground

Holding some cash is smart; hoarding cash can be costly. Over long periods, inflation eats uninvested money. The goal isn’t maximum cash—it’s enough cash. A simple quarterly check keeps you on track:

1. Review balances against Tier 1–3 targets.
2. Confirm you’re earning a reasonable rate (switch if not).
3. Scan the calendar for upcoming expenses—top up if needed.
4. Sweep any excess into your investment plan.

When to use it (and when to hold)

• Use the fund for true surprises that keep the rest of your plan intact: urgent home repairs, medical travel, a job gap, or bridging income while you wait for a bonus/settlement.
• Don’t use it for predictable, budgetable costs (holidays, annual insurance premiums)—set up separate sinking funds for those.
• In market downturns: the fund’s job is to buy you time and calm so you don’t sell long-term investments at a discount.

A five-step setup (10 minutes, really)

1. List core expenses (housing, food, utilities, transport, insurance, minimum debt payments).
2. Pick your tiers using the adjusters above; write the dollar targets.
3. Choose the accounts (Chequing for Tier 1, HISA for Tier 2, short GIC/T-Bill ladder for Tier 3).
4. Automate transfers (weekly/bi-weekly) until you hit targets.
5. Make a rule: what qualifies to tap the fund—and how you’ll refill it after.

Common pitfalls (and easy fixes)

• Too little in chequing: You end up using credit for routine timing gaps. Fix: keep a full month (Tier 1) in instant-access.
• Too much in low-yield accounts: Cash pile grows out of habit. Fix: set a cap; sweep excess to investments quarterly.
• One big account for everything: Emergencies blur with wants. Fix: label separate buckets.
• No plan to refill: You tap the fund and forget to rebuild. Fix: automatic top-ups until you’re back to target.

Special cases

Self-employed/commission-based: Your “shock absorber” likely needs to be larger. Consider a revenue smoothing bucket (3–6 months of average business expenses) plus your personal fund.

Retirees: Your Sleep-at-Night Fund is often a cash wedge that covers 6–12 months of withdrawals, so market dips don’t force you to sell. Pair it with a distribution plan (RRIF, TFSA, non-registered) to optimize taxes.

Parents of students: Keep the first tuition installment + travel/emergency money liquid, separate from longer-term RESP investments.

What “sleep at night” feels like

• You know exactly where the next few months of bills are coming from.
• A surprise expense is an inconvenience, not a crisis.
• Market headlines feel less relevant to your day-to-day life.
• You can make better long-term decisions because the short term is handled.