How much should be my Emergency fund?

rfowler

Not sure if this is in the right place but I wanted to pay some debt off but wanted to know how much my Emergency fund should be

crazyguy

emergency fund !

You pay back the maximum you can afford, no one on here knows your circumstances ie:- do you have a pet, car, home as an emergency should only be classed as a urgent need for money in the likes of a pet being injured and needing a vet straight away, an emergency is not running out of beer or fags

sg1000

crazyguy wrote: »

emergency fund !
an emergency is not running out of beer or fags

I knew I was going wrong somewhere!:)

Phoolgrrrl

I try to keep enough for rent electric oil and food for 6 months but no money for 'treats'. You may need to include debt repayments in that?

tbourner

You're talking about filling in the SOA? Most people who are struggling to pay off debts put 0 in there, as it's usually a better idea to pay off the debt rather than trying to save money (interest rates are higher on debts). If you only have a couple of debts and aren't struggling, then put in what you think is right - if it's your only savings account it depends on how much you're paying off your debt and how long you want to be paying it for - you could save none and be debt free quicker, or pay less, save money and take ages to become fully debt free. If you already have pet/life/house/boiler/home emergency insurance then you don't need emergency funds for those things.

Sparklyfairy

I know that Dave Ramsey says to initially aim for $1,000 (or £1,000) as a baby emergency fund - that should cover relatively minor things like broken down washer, car/house repairs...then you should re-evaluate it once you reach that but a 6 month salary cover would be my ideal aim...hth SF

foxgloves

Speaking from our experience of paying down debt, I would say to chuck whatever you can afford at the debts to get rid of them BUT keep a small rainy day fund just in case you get a big car bill or something else breaks down.....aim for £500 tops until your debts have gone, then you can step it up. I know the usual advice is not to save anything until the debts have all gone, but what we found is that if there is no cushion of money for emergencies, when you get a big car bill or similar, you just end up having to stick it on a credit card or extend overdraft. Everyone's different, but this worked for us, anyway.

rfowler

thinking of around £3k should be enough

tbourner

foxgloves wrote: »

I know the usual advice is not to save anything until the debts have all gone, but what we found is that if there is no cushion of money for emergencies, when you get a big car bill or similar, you just end up having to stick it on a credit card or extend overdraft.

Seems illogical to me, as that £500 (or whatever) will mean you pay off the debt a few months earlier and save that extra interest, if you don't have an emergency then you've won, if you do have one you're just re-borrowing the £500 you paid off.

Same principle as not bothering with pet insurance, and saving £20 a month instead. If your pet never gets ill you keep all that money for yourself, if it gets ill you have it saved to pay the bill - obviously his analogy is a high risk as you might get a very expensive long term illness develop the month after you start the plan, so you only have £20 to cover it rather than thousands in insurance!!! The above idea of not having an emergency fund is a no-risk equivalent.

sg1000

Illogical or not, having some savings can make it feel like you have a "cushion" to land on just in case you take a fall. Also depends what the debt is made up of...if it is all on credit cards that are at 0%, I don't see the problem in saving an emergency fund. If they are all on high % cards like vanquish, I would go for paying the debt before considering the emergency fund

Hales82

We've recently started a DMP with the CCCS and our 'emergency fund/savings' is currently at just over £1k. We kick started it by saving all our pennies whilst setting up the DMP and paying token payments of £5. We've also added a fair bit into it by overtime. We're due another £400 this month so it will be adding up nicely.

I get the thinking behind not saving, and paying off the debt but as we've got no available credit at all we need some cash available in case of a big bill. In fact my washing machine broke a few weeks ago and I had to pay for the repair. As we've got a fixed payment in the form of our DMP we intend to save all our spare cash and hopefully be in a position of making full and final settlements in a few years.