How much for an emergency fund

uncreative

Thanks all. I just wonder how many people actually have an emergency fund in the UK. I am guessing not a lot. I definitely take the point about saving like mad after buying a house - good observation. Having been renting to keep mobile to "climb the ladder" but now wanting to put down roots we have never had to worry about keeping up a house. All the repairs etc we have never had to worry about.

Hmmm. Just when you think you have made a breakthrough there is always more to think about!

PeacefulWaters

uncreative wrote: »

Thanks all. I just wonder how many people actually have an emergency fund in the UK. I am guessing not a lot.

Over a third have none at all. The majority of the rest won't have anything like an adequate contingency fund.

Don't join a race to the bottom though.

I definitely take the point about saving like mad after buying a house - good observation. Having been renting to keep mobile to "climb the ladder" but now wanting to put down roots we have never had to worry about keeping up a house. All the repairs etc we have never had to worry about.

Repairs are usually minor. Replacing one kitchen appliance a year and a boiler / carpets every fifteen years should be budgeted for. A new suite every five years. A new kitchen. A new bathroom. A rarely used dining room with £3,000 of furniture in it is something that baffles me in our house, but Mrs PW likes it. New windows. They cost you!

Hmmm. Just when you think you have made a breakthrough there is always more to think about!

There will always be more. But what I have realised as I get older is that having savings gives you far more choices than not having savings.

As does having good pension provision.

pathtofreedom

I have 6 months net which I keep in my offset mortgage to reduce my interest. I thought this was enough but after a health scare it has made me read my income protection insurance and work sickness details etc again. I thought I had enough full sick pay to cover me until the income protection kicked in but it turns out I don't until you work there 5 years so I need to save another 3 months or more I think to be sure.

Some people say well if you're using it for being sick you won't need a whole month salary as you wouldn't have commuting costs etc, but it depends on the emergency I think as you might still have costs going to hospitals or whatever which actually mean you burn through that money faster.

Not all income protection insurances pay out all the time either, to get one that covers lots of situations puts their premiums up more so by having your own emergency fund you're self insuring for part of that. You can save it in different ways too, so keep some of it more instant access and some of it invested so it is working for you but you could still get to it after 3-6 months or something.

I also don't count my emergency fund for things like boilers or cars or early retirement, I have separate savings I'm working on for things like that. My emergency fund is just for if I'm too sick to work and have no income as this is a big possibility.

silverwhistle

PeacefulWaters wrote: »

A new suite every five years

Eh? I've never owned a suite.. I had second hand furniture for the first 16 years of owning my house, and the same sofa for the subsequent 16 years up until now to go with decent second-hand armchairs from family. I don't feel at all deprived and it was nice to pay off the mortgage in my 40s. Houses can be expensive to run, but a lot of people put pressure on themselves though thinking they _must_ have this or that..

As for an emergency fund, I have none, but starting getting a small pension at 50 means I don't have to cover loss of earnings. I've got shares for long term savings but the cash I had was converted into solar panels.

bouicca21

In the distant past when I was a ftb in the midst of yet another London bubble, the concept of a contingency fund was beyond me. It was save every penny for a deposit, get a house, count every penny... Beg or borrow furniture and white goods...

My now adult children are struggling to get onto the property ladder just as I did.

It might be different for people who live in cheaper parts of the country but IMHO a contingency fund is a luxury for most FTBs.

r2015

I had an emergency fund of £30,000 but I have decided I don't really need it as my and my wife's income is guaranteed by the government.


I've got rid of £10,000 of it so far this year on new heating and holidays.

Purplesky_2

We want to get back to six months wage each. But realistically, I'm not sure we'll get there - something always seems to come up. Six months bills on the other hand is extremely achievable (£6000). I like to have between us enough to buy a new car or replace the roof if necessary too, so about £10k-£12k.

Purplesky_2

Additionally, congratulations on getting debt free! That is a huge achievement!

There are a lot of excellent points being made here about spending on a new house. Remember there are lots of costs that come with buying a house.

Costs to consider:
Stamp duty
Solicitors costs

Moving costs - van hire/boxes/supplies (tape/sharpie etc). Some electrical tape, some printed signs and a sharpie can make the most effective sorting system. Label each box with a colour of electrical tape (I bought a massive set for £20), giving it a label of a room in the new house and a destination, make the signs match in colour and name to the labels. Easy peasy. Then anyone can be on the other end, unloading the truck, because the signs are up!

Mortgage fees - not on all mortgages, but can be in the 1000s

Survey
Mortgage broker?
Furniture
Appliances
Stamps (we used an ungodly number of stamps)
Repairs - (very individual)
Tools - honestly, adds up surprisingly quickly. Rent/borrow if you can for time being!
Decorating
High energy bills - due to repairs/cleaning/inefficient set up of heating until you learn the system/open doors while things get moved in etc
Insurances - house certainly, but also, life/income protection/critical illness/redundancy etc potentially?
Legal stuff - wills/agreements for unmarried couples
Emergency fund (I would say as a minimum £1000 over your personal 'comfort point' - but ideally, £5000-£15,000 able to be spent if necessary)

So if your aim is to buy a house, then you may want to think about all these costs and make the most of the money you have available to you. You are very fortunate to have high incomes. We bought a house 18 months ago with incomes significantly lower than yours. I should point out that we've spent £25k on repairs and "upgrades" (i.e. work that could have been done cheaply for a quick fix, but we've made sure has been done properly) because the house we bought was extremely cheap and in much more desperate need of repairs than even the surveyor realised.

FireWyrm

uncreative wrote: »

Hmmm. Just when you think you have made a breakthrough there is always more to think about!

And your next stop will of course be the 'Mortgage Free Wannabe' board. You're right, it never stops and you never have any 'spare' cash - not when you think about it carefully and all the things that can happen in your life.

Just a small thought though...if you have savings above (I think) £16000, you dont qualify for Jobseekers allowance or any state help. I'm not saying that you should immediately jump on the state for help when you get into trouble, but it does seem that under £13K could guarantee your fixed outgoings for nearly 12 months and still fall under the threshold in which to get state help for a job loss.

InsideInsurance

As it is supposed to be a contingency fund I would base it on your realistic costs rather than salary.

If you feel you need 6 months safety net but currently are only spending half your salary then 6 times salary would be 12 months of costs. Now maybe 12 months is correct rather than 6 but contingency shouldnt including your monthly savings target or arguably including funding things like big holidays etc