How much should I put aside for a 'rainy day'?

Layo909

I often hear that it is a good idea to money aside for a rainy day. However, as I'm already paying mortgage PPI etc, what exactly constitutes a rainy day? How much would people recommend putting aside?

Money_maker

Rainy Day savings used to be equivelent to 6 months of salary.

xrjtg

If you really want a figure, then you could also base it off expenses rather than income. Pick a time period you'd like to be able to survive for without pay, then work out how much you'd need at your current rate of expenditure (with allowances for your PPI).

dunstonh

I tend to use 6 months expenditure but for some I have gone on to use 1 year as it really depends on circumstances. 6 months is the most common minimum people should look for.

Layo909

dunstonh wrote: »

I tend to use 6 months expenditure but for some I have gone on to use 1 year as it really depends on circumstances. 6 months is the most common minimum people should look for.

So let's say 6 months expenditure = £6000. Should the total amount in my rainy day account be £6000? In which case, once I reach £6000 I can stop adding money to my rainy account and spend/save on other things?

dunstonh

In which case, once I reach £6000 I can stop adding money to my rainy account and spend/save on other things?

If you feel 6 months makes it comfortable as an emergency fund then you can go onto your other needs. Remember that you can never have too much but you can have too little.

ermine

You can have too much EF if it becomes an opportunity cost

I have three years' running costs in NS&I and some in a cash ISA as an explicit emergency fund hedge against house repairs/stuff breaking down.

I had to advance my savings plans to get running costs into NS&I since I feared they'd disappear like they did last year so I'm behind on filling this year's S&S ISA.

It's fair enough as a short-term tactic because of the narrow NS&I window but the balance isn't right. It's probably too much EF if I take a strategic view of what I want to do with savings, which is get a longer term passive income from them which NS&I just doesn't do.

Jegersmart

Generally I follow these principles:
1. £10K cash in current account (but may vary) - but consider your other assets - how liquid are they? Settlement period etc. Credit cards can be very handy for a short-term cash flow bridge if absolutely necessary.
2. Max ISA allowances every year if possible. I do not have a single Cash ISA running, and have never had one iirc.
3. Max out any company pension that I may be entitled to.
4. Any spare cash goes into non-ISA wrapper funds or shares/futures/CFD trading depending on the situation.
5. Enjoy life as much and as often as possible, we do not know when it is our time to go.

IMHO, DYOR

jamesd

Next stop for me after short term emergency fund was accumulating enough to live on for life if I wasn't able to work or lost my job and couldn't get another. Most of that money is in investments, starting with stocks and shares ISA since it's long term investing unless actually needed. If not needed it becomes a source of retirement income and part of my early retirement pot.

While they can't necessarily be relied on I also have unsecured credit facilities equal to about two and a half years of spending. Those provide some time margin to sell investments or for cheap credit offers.

rictus123

I am putting away 25% net pay just now...so in 2 years il have more than 6 months net pay which is about 18-20 months expenses.

atush

First is your emergency fund. Be it 3, 6, or 12 months expenditure. Make sure it is in a Cash ISA, or NSI ilsc. AS long as a few months is easy access, more could be in longer term deposits from 6 month to 1 yr.

Then Pension. If you have one, does it need more (probably yes).

Then targeted savings. House deposit, new car, holiday. This could be done in cash (perhaps a regular saver)or investments. S&S isas, or low cost investment trus savings plans. If you need the money quicket than you thought, but it is there, you could 'borrow' frm your cash savings if needed while you wait for it to mature etc.

Then more longer term savings such as more into pensions, more in to S&S isas etc. Or overpaying your mortgage.