How much to keep in savings?

chocoholic1_2

Hi, we are looking at building an extension, which will use up savings & a loan / mortgage extension. But my OH and I can't agree on how much of our savings to keep. I want to keep about £5k (£3k earmarked for our children, and £2k for unexpected money issues / a future holiday).

I am not working at the moment due to the baby, so our there won't be much spare to build up future savings. But my OH just keeps saying that our savings are effectively losing money.

So how much would you keep?

david78

It depends what rate your getting on you savings, and what rate you will be paying on the loan. And it depends on your mortgage term. Maybe you should just keep enough for the family holiday and unexpected events. You can then set up a longer term regular savings plan for your children.

HappyMJ

Normally you would try and keep about 2 to 3 months of expenses saved up (or have access to via an unused credit limit on a credit card) in case of emergency. £5,000 is OK. It may be a little bit high. I would pay some of the loan off maybe just £1,000 and then save harder (£100 a month for a year in a kids regular saver account with the halifax would be perfect earning 6%p.a) to restore your savings balance back to £5,000.

wellused

But don't the pundits keep saying that interest rates for savers are sure to go up in the near future?

opinions4u

Conventional wisdom is 3-6 months net pay should be kept in savings. This buys you much longer should something unpleasant happen.

Easy to say, harder to do.

my OH just keeps saying that our savings are effectively losing money.

Not having savings could be something that loses you your house if something unfortunate happens. A lovely extension is all well and good, but not much use if your house is repossessed.

But don't the pundits keep saying that interest rates for savers are sure to go up in the near future?

No. Or certainly not many of them.

guitarman001

Is £6k the limit where you don't get benefits if you get made unemployed? This is the danger. Pay your way then get forced to live off your hard-earned savings before you can claim for something you've paid-into in the first place.

opinions4u

guitarman001 wrote: »

Is £6k the limit where you don't get benefits if you get made unemployed? This is the danger. Pay your way then get forced to live off your hard-earned savings before you can claim for something you've paid-into in the first place.

Tax credits aren't means tested.

Certain other benefits are NI contribution based.

Others are means tested.

atush

In your case, with a loan to pay off, I might say 2K plus known upcoming spends such as the holiday and xmas. Then build it back up ASAP- even going back to work earlier than planned after the baby.

Normally though, you should have around 6 months spending/salary in cash for emergencies. hard to do when the kids are young, but very important. We do ususally say to do this after paying off debt, which in your case is the loan.