How much cash do you keep in an instant access account?

LizzyByTheSea

I'm in the process of building up a what will hopefully become a substantial nest-egg of savings and investments.

I was wondering how much you all keep in instant access cash accounts? As I'm starting to put money into stock and shares ISAs, as well as looking into fixed term or notice accounts, I'm contemplatin how much I should keep instantly available.

I don't want to find myself in an emergency and without enough cash resource, but I also don't want to be overly cautious and find that I've actually done myself out of interest or returns such as they are.

I'm thinking of keeping about £10k in cash.

lisyloo

We have about £150K but only really because I don't want to tie it up because I need it at some point to pay off the mortage.

But that is one idea - nothing wrong with doubly your savings as an emergency fund (unless of course there's better rates to lose out on).

I'm contemplatin how much I should keep instantly available.

Rule of thumb I'd say 6 months living expenses, but it does depend.
Factors might be your redundancy package, your sickness packages, how employable you are.

My D just had 9 months out of work which was a shock because he thought he was very employable, but he had a decent redundancy package and didn't need to break into the savings.

I don't think we can give you a number or a length of time because it depends on
1) How much you need to live on
2) What arrangements you have in place for the emergencies e.g. redundancy, sick pay, insurance.
3) How long you'd expect the emergency to last.

£10K would not have been enough for us the last 9 months, but we live quite an expensive lifestyle. We spent nearer £30K.

Sorry but it's all dependent on circumstances.

Archi_Bald

It all very much depends on your needs.

Having 6-12 months of readily accessible cash might be prudent if you cannot be 100% sure that your living expenses will definitely be covered by incoming money.

If you have e.g. £100K and plan to spend them in the next year or two, e.g. on a house, car, furniture etc etc, it would be sensible to keep the money in cash.

If your regular monthly income is guaranteed (e.g. from an annuity) and you have no plans for any major spending, a small emergency budget for broken down washing machine etc might be enough - - but again, it depends on your circumstances. You might not be responsible for broken down white goods etc.

vectistim

I have about a 12-18 months' expenses in various instant access cash accounts. In practice it would need several emergencies to happen at the same time for me to get through that money in 12-18 months.

I don't have anything in notice accounts (the alleged higher rates for notice accounts are so negligible at best that I don't bother with them).

Everything else is invested in one form or another.

Glen_Clark

vectistim wrote: »

I have about a 12-18 months' expenses in various instant access cash accounts. In practice it would need several emergencies to happen at the same time for me to get through that money in 12-18 months..

How long does it take to sell shares and receive the money in your account?
But I can understand keeping money in cash to reduce portfolio volatility.
I have about 65% equities, 25% between NSI Index linked bonds and 4.5% fixed cash ISA, 10% in instant access cash earning 2%net (which will drop in April), most of which I would put into shares if the market fell significantly.

lisyloo

How long does it take to sell shares and receive the money in your account?

A few days.

But it's not just about access - not everyone wants to accept capital loss.
Personally I don't want to accept it on my mortgage fund because that's the roof over my head, on other money I accept some risk of capital loss.

Also a diversity of asset classes helps to reduce risk.

I'm sure you know all that, so not sure why you are asking.

JohnRo

I'm about 80% equity investment, 10% bond investment and 10% instant access cash. Currently building cash reserves as quickly as I can while central banks continue to manipulate the markets. No cash locked in, hoping for an inevitable correction that's any thing but inevitable if a real economic recovery somehow materialises.

Doshwaster

I only keep about £2000 in an instant cash savings account for unexpected bills but I sometimes dip into it to help pay for holidays and other one-offs. There is then about another £10+ k in a Cash ISA which would be about 6 months living expenses in the case of loss of income. I try not to withdraw money from that unless there is no other option.

Glen_Clark

lisyloo wrote: »

A few days.

But it's not just about access - not everyone wants to accept capital loss.
Personally I don't want to accept it on my mortgage fund because that's the roof over my head, on other money I accept some risk of capital loss.

Also a diversity of asset classes helps to reduce risk.

I'm sure you know all that, so not sure why you are asking.

Nobody wants to accept capital loss.
As I said I can understand holding cash to reduce portfolio volatility and I do that myself.
What I can't understand is the relevance of 18 months living expenses in deciding your asset allocation, when you could realize the proceeds of shares in a couple of weeks.

Wilkins

I keep around 5% in instant access cash for emergency funds and projected expenditure for the next 18-24 months. But I also keep a further 15% as my market crash fund.

The experience of 2000-3, 2008-10 and even the summer 2011 has taught me the wisdom of keeping cash to hand. For me, the financial inefficiency this represents is outweighed by the knowledge that, if I am wrong and equity markets do not correct, then I will at least make a reasonable, if not optimal, profit on market rises.

lisyloo

Nobody wants to accept capital loss.

I probably worded it wrong.
Some people are certainly prepared to accept the risk of capital loss to get better returns.

What I can't understand is the relevance of 18 months living expenses in deciding your asset allocation, when you could realize the proceeds of shares in a couple of weeks.

Well firstly a lot of people are not sophisticated investors. There are many who don't understand equities at all.
But secondly if this is money you are going to LIVE off, then a lot of people would want it to be secure.

If you personally want to accept some risk over certain periods then that's up to you, but I would have thought that most people who are using the money to feed their children, would want close to zero capital risk.

I personally would accept risk, but I know I have a redundancy package and
sickness cover and a pension payout on death, so I think I've got it covered.
I also don't have any dependents.

Under different circumstances - like mouths to feed - I don't think I would want capital risk.

Sorry if you still don't understand it - but I guess you'll have to accept that we're all different.