How much should an emergency fund be?

Wee_Pilsbury

Thanks for all the advice and replies - as always, brilliant! Crawley_Girl, on reflection I think I would also feel more comfortable having £1000 tucked away and I'll put as much by as I can until I get there.

McKneff I'll definitely do the mini cash ISA as well (except the 2nd one with another provider ) - hadn't even crossed my mind .

Huge thanks again folks :beer:

faithcecilia

I have £1500 and am hoping to raise this by the end of May when my contract finishes to at least £2k. For someone who spent many years in debt this is a lovely buffer,and has proved its importance this week as my employer managed to miss sending my wages - a few years go that would have left me in dire straights, now I know I havete oney there to live this week.

McKneff

rictus123 wrote: »

Naughty naughty!


you are only allowed 1!

I know that, thats why i said 'in April, start another one with anotherh provider'

property.advert

Wee_Pilsbury wrote: »

Hi all

I'm a newbie in terms of this board and although I don't really have that much in the way of debt :eek: I am for the first time ever, intending to have an emergency fund to deal with emergencies rather than relying on Mr Plastic. What I'm wondering is how much per month is reasonable for an emergency fund and at what level is it reasonable to stop?

At the moment I have an emergency fund of £200 and I was thinking of adding £30 per month to it until I get to £500. I own a modern style flat that has only cost me £25 in maintenance costs this year and obviously I'm hoping that will continue. In terms of redundancy and being off work sick, I have a very generous redundancy scheme and I'm paid when off sick.

The great advice given on here has given me the push I need to get this sorted once and for all and any advice at all will be gratefully received.

Thanks in advance:beer:

To be completely serious ? A minimum of 1 year's net income, preferably 2. I know it is a near impossible dream for many but that is about the optimum. In reality, a year's worth of all bills and subsistence money. Still a near impossibility. That is one reason why we had this massive crunch, people didn't have enough to cope with losing a job or income.

You mention redundancy but if your company goes under, it may not be able to pay that out. It is not a government backed guarantee so you have to weigh up the probability. If you work for a large bank then you are likely to be paid out whereas if you work for a small company, then I would not count on it, certainly not at the point when you would need it.

Check unemployment benefits relating to your mortgage interest. It used to be 6 months waiting, it may well be more now. If you get any payments from redundancy, then you'd have to use some of those to live on and pay your mortgage during that time. If you got no money, then how would you pay your mortgage until the state came in to help ?

No idea what your outgoings are but if said £500 a month for your bills and then your mortgage on top and then times that by 12, it would be a good start. You'd know you wouldn't be right in it if the worst happened.

No disrespect but £200/500 in an emergency fund is not going to last a month. £200 wouldn't pay for your car insurance when it became due or for some work on the roof etc. Hopefully you'll never need it but the true amount is higher than most people can ever save. Thousands or tens of is the real safety figure.

BabyBetty

I am a contract worker so have to set aside money for when I am in between jobs. This is usually about 3 months of expenses.

BB

dippykitty

I'm freelance and can't guarantee a set income so I like to have a buffer saved that I can dip if needed. At the moment, it's just over £4000 but I can't shake the feeling that's not enough if a real emergency crops up!

property.advert

dippykitty wrote: »

I'm freelance and can't guarantee a set income so I like to have a buffer saved that I can dip if needed. At the moment, it's just over £4000 but I can't shake the feeling that's not enough if a real emergency crops up!

I moved from salaried to contract work back in the 1990s and in early 1999 I had to go through a period of around 6 months before I secured another contract. It was hell. Your spending overshoots your loss of income and your commitments don't go away. We'd just moved so all the cash was in the property with little spare.

In the immediacy of a loss of income, people tent not to panic. They keep spending and hoping that things will work out. Totally the wrong thing to do (I was just as guilty) and you've already planned for a holiday, committed to spending this and that, arranged to buy things etc. The skill we need to learn, in addition to become leaner in general spending terms, is to react quickly, to stop all unnecessary spending and make whatever emergency fund we have last that little bit further.

I didn't back then and ran up about 20k of debt. Paid it off but I was in the fortunate position of having an income (when it came) way above my basic needs. Yet still I didn't learn properly and though not a direct cause of my current problems, my inability to see the situation for what it was and put more away in the good times meant that I eventually, a decade later, do not have the wealth I should have had and am, (due to other things as well) now in a very untenable position with those high earning years behind me and nothing to show for it.

Don't make the same mistakes I did. Put away as much as you can.

tiff

We are going on the basis that if my husband was made redundant he would get a good package and we could probably pay off the mortgage. If he was criticially ill and couldnt work for a long time we would be in trouble. We cant get critical illness insurance as he has had 2 heart operations in the past. So, once the debt is completely cleared we will work on saving at least £6000 but that would only be less than 3 months of his income.

Its things like this that make me realise just how much money we couldnt afford to spend in the past.

lisalongsox

Just wondered if alongside paying off debts I should be putting a little away each month in case the worst ever happened regarding job loss etc. I mean if we were both to be unemployed the credit card debts would be least of worries and we have insurance to cover mortgage for up to 12 months. We would need day to day living money for food and utilities though.

Any thoughts?

dippykitty

property.advert wrote: »

I moved from salaried to contract work back in the 1990s and in early 1999 I had to go through a period of around 6 months before I secured another contract. It was hell. Your spending overshoots your loss of income and your commitments don't go away. We'd just moved so all the cash was in the property with little spare.

In the immediacy of a loss of income, people tent not to panic. They keep spending and hoping that things will work out. Totally the wrong thing to do (I was just as guilty) and you've already planned for a holiday, committed to spending this and that, arranged to buy things etc. The skill we need to learn, in addition to become leaner in general spending terms, is to react quickly, to stop all unnecessary spending and make whatever emergency fund we have last that little bit further.

I didn't back then and ran up about 20k of debt. Paid it off but I was in the fortunate position of having an income (when it came) way above my basic needs. Yet still I didn't learn properly and though not a direct cause of my current problems, my inability to see the situation for what it was and put more away in the good times meant that I eventually, a decade later, do not have the wealth I should have had and am, (due to other things as well) now in a very untenable position with those high earning years behind me and nothing to show for it.

Don't make the same mistakes I did. Put away as much as you can.

Thanks for sharing your thoughts. That's my big worry so I'm working on having a solid amount in the current account to fall back on for bills etc, then building up the emergency fund as much as possible so I'll definitely be taking your advice.