How much buffer/savings to keep in a current account

Eco_Miser

thatwilldo wrote: »

Hardly a waste of money when it has been used to pay towards a holiday!

The waste is not getting an extra £90 or more in interest.

thatwilldo wrote: »

Current accounts paying a good rate are great but I don't want to move my bank account they have been first class for nearly 25 years with me.

I am not sure the rates will continue on current accounts anyway.

You don't have to move, just open an extra account, and just use it for saving your buffer in. I still use the account I opened in 1971, but I have lots of others earning interest.

TSB has just opened an account paying 5%, and say it's not an introductory rate - so that should be around for at least two years.

How much? At least 3 months spending, as has been said. It depends on what other resources you have and how easy/desirable it is to access them. Personally I have about three years spending in current accounts, but that's because I don't spend a lot, I'm actually living off it until the pension kicks in, and it's also my emergency fund and house maintenance fund (which isn't included in the spend above), and because it's earning a relatively good rate.

YorkshireBoy

thatwilldo wrote: »

So after all of this, my questions are:

What do people generally keep in their current account as a buffer/for emergencies?

You're assuming people only have one current account...let's call it their 'bills' account. My bills account has a £100 float/buffer.


If I have an "emergency" I'll use a credit card. If that's not accepted I'll use a debit card or take cash from a 3% AER paying current account (because I obviously wouldn't want to withdraw from a current account making 4-5% AER).

Is it worth building this account up again?

No, not when you can make more money elsewhere.


This is MSE, and no-one should be saving at 0%!

jimjames

thatwilldo wrote: »

I am not sure the rates will continue on current accounts anyway.

True. It's only been 2 years so far and guaranteed for at least another 12 months. That's only £450 you've missed out on. So much for this cost of living crisis

YorkshireBoy

jimjames wrote: »

That's only £450 you've missed out on.

The £3K was amassed over 2 years (and 5% accounts weren't available 2 years ago were they?) so probably a good bit less than £100 is the actual loss.


What's more important now is that the OP sees the 'light' and changes his ways.

Thrugelmir

I've always been more concerned with having a sizable buffer than the amount of interest I earn. As borrowing short term money on credit cards or overdrafts soon wipes away any benefits.

So keep 6 months money as a minimum in an instant access ISA.

countingstars

I think the buffer depends on how much a person earns. Someone who earns a lot will have a larger buffer than someone on, let's say, minimum wage?

Personally, I keep £500 as a buffer in my account. It'll be pennies to some and a fortune to others.

My 3 month contingency fund is safely in a savings account that gives me instant access and provides some interest.

YorkshireBoy

Thrugelmir wrote: »

I've always been more concerned with having a sizable buffer than the amount of interest I earn.

These days you can have both at the same time!

As borrowing short term money on credit cards or overdrafts soon wipes away any benefits.

My credit cards offer up to 56 days interest free credit (and one of them has over 400 days!)...that's plenty of time to withdraw from my savings vehicle and pay the balance off. As to overdrafts, the OP has savings elsewhere, so wouldn't need to use an overdraft due to a lack of funds in his current account...to use his situation as an example.

So keep 6 months money as a minimum in an instant access ISA.

Why an ISA?...when you can (at least) double your return with current accounts.

Archi_Bald

YorkshireBoy wrote: »

Why an ISA?...when you can (at least) double your return with current accounts.

It almost pains me, some people's fixation with cash ISAs and savings accounts, when there are so many brilliant alternatives to earn more interest on instant access cash reserves.

SG27

My current account has £0 buffer. I know what my bills will come to and everything else is transferred out. I have an emergency fund elsewhere along with several interest paying current accounts and a couple of savings accounts.

thatwilldo

Thanks for all your responses never imagined it would have provoked such vivid responses in some cases.

I have seen the light (whilst munching on my american pizza and taking a phone call from Natwest thanking me for my loyalty) with the advent of these high interest current accounts - I am missing out if I keep any reasonable balance in there.

Thanks again everybody and to some, thanks for the laughs. Keep saving!!!!!