How much should an "emergency fund" be?

Arch-Angel

Hi everyone

My first time to post on MSE - so please be gentle.

I'm a FTB and I'm about to step into the minefield of buying a house! I'm the the fortunate position of being able to have a reasonable deposit and still have money left over for an emergency fund. My question is "how much should I allow for this?"

The bigger my deposit the less my mortgage, but I don't want to find myself in a position whereby I can't pay for broken windows and leaking roofs without hitting the CC! The benchmark that I've heard about is 3 times your monthly salary - is this a reasonable benchmark? Please assume (in your responses) that no additional money will be paid into this "emergency fund" for 12-18 months (the additional money will be used to clear existing credit over this time period).

homersimpson_3

some say 3 months salary- others says 6 months outgoings- others say 6 months salary. you should have (& requirement of mortgage) buildings (and contents?) insurance which should cover any broken windows & leaking roof. do you intend to have insurance to pay mortgage just in case you lose job. if so same rule applies for any insurance i.e. make sure you get the best deal by shopping around.

Stonk

Six month's outgoings, I would say. Six, because I couldn't be sure of getting a replacement income in three months, but I'd be more confident within six.

I certainly don't think that the amount should be stated in terms of your income: what matters is your expenditure (although numerous so-called advisors have tried to tell me "keep 6 months' salary tucked away"). The emergency fund is designed to pay your outgoings, not to replace your income. For instance, I have lower outgoings now than I did when I earned a third of what I currently do, so I don't need as much emergency fund. If I kept 6 months' income, I could probably live on it for 5 years!

Bisoy

After learning how to survive a financial crisis and had turned it around I couldn't agree more with the previous post. We would also consider 6 months of outgoings.

We are trying now to reduce our monthly outgoings thereby increasing our savings. We are both working and our goal is put away the other whole month salary to savings and we are nearly able to achieve that goal.

Snow_Dog

I have always felt 3-6 months outgoings is ideal, however if you are just setting out homebuying, starting family etc this can sometimes be difficult.

It also depends on your other safety nets, eg if you get made redundant would your parents/family be in a position to step in and help out. Not necessarily just financially, eg meals.

We used to always try to keep at least £1K in a building soc. account as emergency backup (I had a very secure job which then turned less secure but with redundancy as security). Also if you do get made redundant would you find it easy to pick up work in your field.

Its funny because I was talking to my nan who said she always wanted to keep £100 in the bank as the emergency fund.

So it all depends on your circumstances, what you can afford to hold in reserve and what you feel comfortable with.

regularsaver1

I've always been told about £3k rainy day - but outgoings is best to judge itr