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

kidmugsy

We expect to keep six months' outgoings, plus our new car fund, on instant access. But they kept getting eaten at by unexpected repair and updating costs for the house.

lisyloo

We expect to keep six months' outgoings

Just wanted to convey some personal experience in case it's of any use to someone.
My DH was fairly high in his career - next step was the board.
We thought he was very employable and would easily get another job and so did many of his colleagues as he had lots of good contacts.

It took him 9 months to find a job and that was working very hard at it and networking etc. and also being very flexible on career, location and finance (and I do mean very - 50% pay cut anyone?)

In the end he did get something, but he was out of work a lot longer than we expected. Fortunately that didn't cause us an issue as he had redundancy money (and we had savings).

I just wanted to put that forward because in these tough economic times it can be longer than you think.

vectistim

Glen_Clark wrote: »

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.

There's no specific reason for the figure, that's just about where it tends to end up, alternatively I could express it as about 5% of gross assets, or a slightly high proportion of net assets. It leaves space for a reasonable level of expenditure on other things or further investment, without getting close to the 3-6 months' emergency buffer.

iAMaLONDONER

LizzyByTheSea wrote: »

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.

All my 8k is in cash in current accounts (the high-interest ones)!

LizzyByTheSea

Thanks for your replies everyone - it's really interesting to see the different amounts and views.

Yes, I think the fact that I don't have any dependents does affect my outlook, and I think I'd be a lot more cautious if I had children.

Ideally I want my stocks and shares ISA to be a long-term investment, rather than something I'd end up realising in a hurry, if, for instance, I became ill and unable to work. I've seen the six months figure bandied about a lot - interesting to see how many people keep more.

FatherAbraham

kidmugsy wrote: »

We expect to keep six months' outgoings, plus our new car fund, on instant access. But they kept getting eaten at by unexpected repair and updating costs for the house.

Unexpected? That sounds bad.

I have problems budgeting for house depreciation/maintenance too.

Expenditure is unpredictable and lumpy. The roof doesn't need to be replaced every year, but it does need to be replaced every so often. Kitchens and bathrooms "fail" through constant use, and becoming outmoded. Those lovely, double-glazed windows installed in 1994 are now leaky, contaminated with internal condensation, and the white PVC looks unconvincing to the modern eye.

I suppose one should start with a percentage figure per annum, something like 1.5% of the house's value (or 1%. or 2%, who knows?). This becomes the "sinking fund".

Accounting for this kind of stuff is tricky, but the sums involved (tens of thousands for structural repairs) can be devastating for the unprepared.

This is probably the weakest part of my budgeting.

Warmest regards,
FA

kidmugsy

FatherAbraham wrote: »

This is probably the weakest part of my budgeting.

Apart from the care home costs, eh? Unknowable as to incidence, size and timing.

Wilkins

FatherAbraham wrote: »

I suppose one should start with a percentage figure per annum, something like 1.5% of the house's value (or 1%. or 2%, who knows?). This becomes the "sinking fund".

It would vary from area to area, though, since maintenance costs are probably not going to vary as much as property prices. However, the sinking fund idea is the right one, IMO.

I use an arbitrary figure of £5k per annum to cover "home and holidays" in my projections, although it does not go into a separate fund.

Glen_Clark

lisyloo wrote: »

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

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.

This is an interesting book. It shows what tends to happen when money is being printed on the scale it is now. The people who had anything left held assets - including shares, not cash: http://www.amazon.co.uk/When-Money-Dies-nightmare-Hyper-Inflation/dp/1906964440
So I look on shares as reliable an emergency fund as sterling.

jimjames

I have £2500 in cash savings, that's the limit for getting 5% on the Nationwide Flexdirect account.

Some additional funds are in mortgage overpayment that can be repaid back but the vast majority of assets are invested in S&S ISAs although can be accessed fairly quickly as mentioned already.

I also have credit cards that are paid off every month with large limits available if anything unexpected happens.

BTW I've got 2 kids as well so I guess it depends on the level of risk you are prepared to take even with family but I'm well aware that many others have no savings at all so we're still in a better position.