Saving for emergencies

Madchickenlady

Bedsit_Bob wrote: »

Do you own or rent?

Hi Bob, My house is a shared ownership house so I part rent part buy, I own a 50% share of the house

Madchickenlady

Bublin1 wrote: »

Google Dave Ramsey and his advice.
He recommends that you save £1000 for emergencies and THEN tackle debt. This is what I did.

Wow thats a lot I was only thinking of a couple of hundred... I will check him out though:)

Bublin1

His theory is that £1000 should cover any 'regular' emergency ie car repair if you need it to get to work. Essential appliances that need replacing. He makes it clear it is for real emergencies only and not for dipping into. £200 is not going to cover anything.
I have a greater feeling of security knowing that I have this amount stashed away. No need for credit cards.

bsms1147

The argument against having an emergency fund is that it is money that you could otherwise be using to pay off your debt. A debt at 20% interest would mean that £1000 cash in emergency savings was costing you £200 in real terms each year. So long as I had a credit card I could use in the event of an emergency I'd be happy having essentially zero emergency savings as cash.

[Deleted User]

Madchickenlady wrote: »

Hi Bob, My house is a shared ownership house so I part rent part buy, I own a 50% share of the house

So who is responsible for major repairs, eg. boiler, roof, walls?

Frugalsod

Bublin1 wrote: »

His theory is that £1000 should cover any 'regular' emergency ie car repair if you need it to get to work. Essential appliances that need replacing. He makes it clear it is for real emergencies only and not for dipping into. £200 is not going to cover anything.
I have a greater feeling of security knowing that I have this amount stashed away. No need for credit cards.

That makes sense when you have no debts. At the moment I am concentrating on clearing the debts and then will rapidly build a cash pile at home and in the bank for emergencies, before I start spending or saving.

Vikipollard

We have no debt other than the mortgage, so try to maintain a £2000 emergency fund. This has been invaluable this week as the car failed it's MOT to the tune of £300, then broke down 100 miles from home and needed recovering (£350) and has just needed £300 of repairs. I shall mostly be saving again now to get the money back!


We don't have credit cards (I can't be trusted with them, hence the signature below), so we have to have a back up plan. It is a bit of a 'hmm' point for you OP; it is right that what you save cannot earn as much interest as what you repay from your debts.


But what if you find yourself in an emergency situation where you can't pay by credit card? A home emergency, perhaps, where a small local trader comes to do the repair. Not everyone accepts payment by credit card.


Just my tuppence-worth

Frugalsod

Vikipollard wrote: »

We don't have credit cards (I can't be trusted with them, hence the signature below), so we have to have a back up plan. It is a bit of a 'hmm' point for you OP; it is right that what you save cannot earn as much interest as what you repay from your debts.


But what if you find yourself in an emergency situation where you can't pay by credit card? A home emergency, perhaps, where a small local trader comes to do the repair. Not everyone accepts payment by credit card.


Just my tuppence-worth

Maybe the solution is to build up the savings very slowly so much per month. Then as you gradually clear the debt you might have more available to put aside as additional savings.

bsms1147

Vikipollard wrote: »

But what if you find yourself in an emergency situation where you can't pay by credit card? A home emergency, perhaps, where a small local trader comes to do the repair. Not everyone accepts payment by credit card.

You can get cash out of a cash machine with a credit card. Granted you'll pay interest on it, but you'll still be saving money compared to the alternative of having an emergency stash of cash at home.

The only downside is the fact you would have to leave the house to obtain the cash from a machine.