How much is enough?

squidgychesspiece

Hi All :wave:

We need to set up an emergency fund and heard you should ideally aim to have 3 months salary (:rotfl: anything would be nice) but seems silly to be trying to save and having too much languishing when there is debt to be paid!

Just wondering who is sensible enough to have emergency funds and how much you try to keep aside?

Squidgy

mildredalien

It depends what your emergency fund is for. Mine is for unexpected everyday or car expenses, but because I rent I shouldn't have to pay too much for anything, so I aim for about £2-300. At the moment I have about £280 which needs to cover a small partial-rent payment for a few extra days before I move house, and probably some new tyres for my car soon. This fund is also for random expenses like haircuts and gifts. If you were a homeowner you might want more in case a boiler explodes or something...

The 3 months salary is for a general emergency fund so that if you lose your job or get ill or another disaster happens, you have some money set by to see you through for a while until you can get sorted. Ultimately sensible, but personally while I'm in debt unachievable!

HappyMJ

It also does not need to be cash in a current account. It can also be access to credit such as an overdraft or credit card for use in case of emergency. With the Natwest/RBS fiasco make sure your access to this money is spread around a bit too. I could redraw about a year's worth of income but it's all held in an offset account with RBS which I don't have a debit card for (to reduce the temptation to use it) and I usually transfer it online to an account that I do have a card for but transfers for the past few days have not been working.

TheHuntress

Good question really. I've always wondered the same. Some say 3 months wage some 6 months. What I wonder is does this need to include everything such as expenses for shopping and all bills so you could essentially "live" without any money coming in for 3/6 months? Or is it just enough to cover the main bills? :idea:

Firewalker

I would say £1,000 - this should be enough for most emergencies that are not catastrophic. PF advice for large emergency fund usually comes from the States where the welfare provisions are different.

Firewalker

horsechestnut

Same as Mildredalien, but if your overdraft incurs interest then try to get rid of that, so that you genuinely are living off your income.
Are you doing surveys? They don't pay much but over the year you can build up a nice little stash of vouchers that can be used to buy things in the sales or emergency gifts; some do pay cash which is even better! Look on the Up your Income thread ( some survey sites are better than others and it varies from person to person which ones are best for you) also send off for every freebie that you can, and think of what else you can do with the freebie e.g. a sample of shampoo that you may not like can be added to the liquid soap dispenser and used as handwash - think laterally!! See Freebies Thread. If you haven't already done it, then read the Old Style Thread; have a pen and paper beside you to write down tips!!
I am fortunate not to be in debt, but do manage on a modest income, and despite being naturally frugal, I have learned several tips from this site that had never occured to me - the Stardrops in spray bottles instead of buying bathroom & kitchen sprays!!
Sorry I have got carried away; hope that something here helps.
Also if you are putting money away, use an instant access ISA so that you get all your interest taxfree; you can save just over £5k per year which you can take in and out over the year up to that limit; I know chance would be a fine thing!! Many banks are offering ISA's at 3.3% easy access.

squidgychesspiece

I suppose ours would be for everyday unexpected expenses like the £50 car repair bill we had recently but also incase I ever find myself being made redundant again to know we have something to fall back on unlike this time. If I had not received a payout I don't know what we would have done - most likely looking at bankruptcy and that is scary.

Good point about it not having to be cash in a current account. I do have a £750 overdraft which is clear so I suppose that is always there but not quite the same security as having your own money.

TheHuntress - I think it would be essentially whatever you spend in a month on non essentials, bills, food, debt repayment etc. I imagine few people have this much but I could be wrong? Maybe the more sensible people are secretly squirrelling funds away :rotfl:

BlushingRose

We'd love to have an emergency fund but we never have enough money available to build one up.

theoretica

I think of two sorts of emergencies. The ones that are practically certain to come up, but you don't know when (car and household appliances sort of thing). I find a few hundred pounds is enough not to worry about these. Of course it doesn't need to be in cash- spare capacity on a credit card can tide you over an emergency too.

The other sort of emergency is the sort that may not come up- redundancy, serious medical problems... I know some people who work in very unstable industries and have to expect some months of unemployment every couple of years. My emergency back up for these doubles as retirement savings and also involves knowing how which treasured possessions I could sell.

sistafromanothermista

Well our emergency fund is £1200, just in case. As this covers 1 month mortgage payment

YORKSHIRELASS

Well I aim to keep £400 in an account for emergencies. This would cover us for an unexpected car bill or a new washing machine or maybe a house repair.

Beyond that we do have quite a bit of credit available (an unused overdraft of £2.5k for example).

Failing that I know my parents would help out but I would be reluctant to ask them. No chance of us saving 3 months salary and with the debt we have it wouldnt make sense.