3-6 months salary untouched

guitarman001

IF I was to stay in this country I always thought I'd take ALL my savings and whack the lot down on a house as soon as possible. Would be sad to see it all go, but maybe it'd be worth keeping £5k or so aside just incase anything untoward happened.

Ark_Welder

Any wrote: »

Depends on what you cal "easy access" ad what you call "volatile" I suppose..
I will never have large amount of something that is higly volatile I don't think.

What do you call easy access? To be able to withdraw immediately? Why would you need it all immediately? What kind of emergency would require you to drawn out 6 mths worth of salary right this minute?
You know, not be able to give notices on higher paying accounts etc..

More volatile assets are thing like equities and bonds, especially high-yield bonds. That applies to funds that hold these too. Given the income available from (gilt and corporate) bonds close to their maturity, cash can provide a higher return without even the already low level of volatility that bonds such as these have. Not a scenario that applies to all investors, but it may do for some. And to those for whom it does apply, easy access cash is doing something, not nothing.


Easy access does not necessarily mean instant access. For instance, I might hold three months' expenditure in an instant access account and have four one-year bonds that mature three months apart and that are rolled over into whatever issue becomes available. But given the minimum amounts required, that would not be feasible for everyone. Even for those that it is, it might result in them having to hold too much as cash, or the difference in interest rates might not make it worth their while.

The purpose of a cash buffer is not necessarily because it will be needed all at once, but in case an individual's income is interrupted, e.g. they lose their job, or their income is sporadic, e.g. they are self employed. How confident they are of their income stream would determine how many months' expenditure they maintain: more confident, fewer months; less confident, more months. But an example of where a lump of cash might be needed all at once is for those that have central heating systems but no cover in the event that it breaks down: how much notice is anyone likely to want to give in the middle of winter before they have enough cash to be able to get it fixed? Similar situation with a car and the MOT.

The point is that each individual tailors the amount of easy access cash held to their individual circumstances and needs. Same applies to cash that is less easy to access too.

atush

Any wrote: »

I agree with Kate. It's all well and good to have buffer for emergencies and while I agree a lot of people spend money willy nilly, just because you have thousands and thousands for your "emergency" it doesn't mean that it is necessary to have 18 months of monthly salary put away while not having a life.

S/he asked a nice question to ponder over and discuss, to liven up this forum a bit and find more about our ambitions and personalities, and got preaching and lectures from you.

You made your point and gave your opinion the first time round. No need for further preaching.

I agree with you in general, but reading Kate's posts I am thinking that lifestyle overspending is hampering their savings goals- the OP has been quite defensive on this point.

katejo

atush wrote: »

I agree with you in general, but reading Kate's posts I am thinking that lifestyle overspending is hampering their savings goals- the OP has been quite defensive on this point.

Only because of the responses from FatherAbraham. If you were to ask anyone who knew me , they would tell you that I am not the overspending type . If I want something I save for it.

MoneySaverLog

jimjames wrote: »

It surprised me with a colleague recently who was on the phone to gas company saying they couldn't afford the £25 increase in the monthly DD for their bill.

On the desk next to them was their new iPhone.

If they were unable to afford £25 a month then I'm betting they haven't got 3 months spending as savings so it gave an interesting perspective on priorities.

Could it be they were trying to negotiate a cheaper tariff

jimjames

MoneySaverLog wrote: »

Could it be they were trying to negotiate a cheaper tariff

Nope, they were seriously saying they couldn't afford £25 per month extra as we spoke about it afterwards.

guitarman001 wrote: »

IF I was to stay in this country I always thought I'd take ALL my savings and whack the lot down on a house as soon as possible. Would be sad to see it all go, but maybe it'd be worth keeping £5k or so aside just incase anything untoward happened.

You'd certainly need to do that. If you buy a house and the boiler breaks how would you pay for it otherwise if you have no savings. I'm assuming it isn't a new house with 10 year guarantees.

katejo

jimjames wrote: »

Nope, they were seriously saying they couldn't afford £25 per month extra as we spoke about it afterwards.

But what was their definition of afford? Have they got several credit cards already stretched to the limit and an overdraft or does it just mean that they would rather spend the £25 on something else?

bigadaj

jimjames wrote: »

Nope, they were seriously saying they couldn't afford £25 per month extra as we spoke about it afterwards.



You'd certainly need to do that. If you buy a house and the boiler breaks how would you pay for it otherwise if you have no savings. I'm assuming it isn't a new house with 10 year guarantees.

Yes, but try claiming on those guarantees Nhbc warranty is frequently not all its cracked up to be.

FatherAbraham

katejo wrote: »

If you were to ask anyone who knew me , they would tell you that I am not the overspending type . If I want something I save for it.

You're defining "overspending" as buying things before one has saved for them. You're pointing out that you're not running a current deficit for your regular lifestyle spending, unlike other people you know.

The point which others are trying to make is that there's a harsher definition of "overspending", which is where one is consuming too much of current income to save for the inevitable periods in the future where one is unable to earn.

Once one looks at having a prudent saving pot to protect against "employment volatility", not to mention thinking about retirement-income needs (although the latter is not so much of an issue for folks with defined-benefit pension arrangements), it becomes clear that there are significant deficits which a prudent individual would think about filling before one spends too much of current income.

At present, it looks like many people are putting far too much wealth into real estate, and not enough into their future income-provision pot: http://www.bbc.co.uk/news/business-22746096

Warmest regards,
FA

Jegersmart

katejo wrote: »

Just curious to know how many people do follow this advice (assuming no debts to pay off other than the mortgage). I hear this recommendation over and over and over again but who takes any notice, particularly at a time when salaries are frozen and interest on savings is so poor.
I currently have just short of 3 months take home pay.

This sort of time is exactly when taking notice of this is all the important imho.

J