Emergency fund- how much?

josephine82

Hi all

My best friend got made redundant from her job last week. She has a mortgage, credit card debts, overdrafts etc. and NO savings.:eek: She is obviously unbelievably worried about finding another job and covering all her expenses.

This started me thinking that I don't have an emergency fund should something like this happen to me. I have savings in an ISA for my house deposit, but I wouldn't want to have to use this. Plus, if I buy a house/flat then I would need an emergency fund even more to cover my mortgage if I lost my job.

My question is- how much do people think should be in an emergency fund? A certain number of months salary, or rent and bills for X months?

Be good to know what people think.
Jo xx

PedroMatias

Estimates will vary. Some say 50-100% of your salary! On DFW I doubt you'll find anyone with anything near that though.

Swans1912

I've heard many people mention you should have enough to cover at least 6 months of your typical expenses. I guess this would be a little higher if you don't expect to have a pay out from work either - that way you have 6 months plus what ever they give you.

mrsb83_2

If you're debt free, you could be looking at 6 months of expenses. I think that's what I'll be aiming for.

downsizer3

Yup - I'm paying off some debts but also trying to increase my tiny £500 pot! I'm aiming for 6 months of bills and living expenses.

JustinCredibleGillespie

I've heard it being recommended to have at least 3 months salary as an emergency fund.

For me that would only be £4100 but i'm sure I could cover any unexpected expenses with that.

JCG

xx

foxgloves

The old advice used to be 3 months worth of salary or 6 months if you are over 40 and/or the job situation is very bad, like it is now. That would be to live on if you are suddenly without an income. You also need a small rainy day fund to cover other eventualities, such as a big car repair bill, replacing a large essential appliance such as cooker or washing machine, so that these do not go on credit or overdraft. I watched an interesting documentary yesterday on iplayer about what caused the global economic downturn & what Britain needs to do to survive. One of the things the programme looked at was attitudes to saving in the UK. Most people who were stopped & asked in the street had no savings at all & didn't know what they would do if they had an emergency. Then this was compared to attitudes to China, where people of all ages save, even though they earn less than we do over here. The people who were asked seemed to have a much more sensible attitude, more like our grandparents would have had. i.e Spend half, save half, always have something put by for your future, and avoid debt.

spadoosh

hmmm, have emergency house funds, dont have an emergency jobless fund. Would like to think my jobs are fairly stable though, in possibly the 2 sectors that havent been hit as hard by recessesions etc and are actually growing.

Sod it, live for today i say! Running away to sit on my naughty boy step.

josephine82

I was thinking 3 months so that's probably a good place to start!

Obviously I would hope that I would never lose my job but I just think you never know- and if I am not in debt, and have a salary where I can save a bit of money towards the future, then think I should!

Just checked my work redundancy policy out of curiosity and I get 1 weeks pay for every year I've worked here. So 3 weeks pay- That's ridiculous!

bargainbetty

My mum always told me to have a Screw You pot..... So called because sometimes you're the one saying it and sometimes you're the one hearing it!

I try to have three months worth of bill money, based on my usual monthly budget, and am aiming to get it up to six months by the end of next year. I class anything over the three months as available emergency money at present, but might try to build a different pot for that too.

It's come in handy before - I was out of work for five months, and I was down to my last bit when an offer came through. Without those savings, I have no idea how I would have managed.

Ilona

I have never had any savings for an emergency, not that I have spent my money in a frivolous fashion, it has taken all my wages to keep up with a reaonable living standard. I have a deposit account with a couple of grand in, in case my cats get sick or the car packs up, but that's all. There was a time when I was off sick then lost my job, I was down to one mortgage payment left in the bank at one point. I never went into the red though, just pulled myself back up through frugal living and being very careful.

I took out an insurance policy when I moved house, which guaranteed to pay my moprtgage if I couldn't work. I'm glad I did. It paid out for seven months which took the pressure off somewhat.

To be honest flying by the seat of my pants was an education in survival, a challenge to which I rose. When the screws are turned on I figure out ways to come out the other side. Having very little money doesn't bother me, I have enough.

I'm not sure how much you should put by for emergencies, because I don't have emergencies, I always find a way round it.
Ilona