How much buffer zone?

nichow80

Hi Newbie Here,

I changed bank account a year ago from NatWest to Nationwide. Initially Nationwide would not give me an overdraft (had high debt then but all paid off now) :beer:.

I started to save an amount each month and leave this in the account (FlexDirect) to act as my own personal "overdraft", this over the course of a year amounted to £1,500 which was earning interest. Nationwide have now offered a massive £5,000 overdraft (which I will have on account, not use but will keep for the absolute of emergencies).

My 'dilemma' now is I have trained myself to see that £1,500 balance at the end of a pay month as absolute minimum for so long I am loathed and 'scared' to remove it and have been keeping my minimum balance at this figure. This account is now FlexPlus (benefits are in constant use) so still earning 3% on this balance.

My question is what figure do most people leave as the minimum? I know this might sound odd, but I feel i need others advice either way.

Be gentle!

Carnival789

Do you mind if I ask what you plan to do with the £1500 once you have taken it out of Nationwide?

Would it be an option to leave the £1500 where it is and just carry on as you were? I'm not really a fan of overdrafts on interest bearing accounts as, like you, I've always used my savings buffer for this purpose!

nichow80

it's not really going to be used for anything specific, just emergency funds really.

Just don't want to leave too much as a buffer in the account but also don't want to have nothing in there to fall back on and end up using the overdraft!

mgdavid

My way of managing money is to check balances often and to shift money around as necessary.
I try to organise bills, DDs, SOs, etc to all happen at the same time of the month so once they are paid any balance gets moved into an interest-bearing account. If I get an unexpected bill or expense then I simply transfer enough back into current account to cover it.

Flobberchops

If you're earning 3% on it, what's the problem? Leave it there unless you can get better interest elsewhere. It sounds like this was a positive habit to get into!

marleyboy

As a rule, I ensure I have at least a £1000 buffer at all times. I do have an overdraft limit but never wish to go into it.

Emergencies do come along, be it a replacement washing machine or some unexpected mishap that may cause me to dip into my buffer, but I ensure it gets topped back up, anything less than a £1000 in my account will give me sleepless nights until I top it back up.

Eco_Miser

Generally, I keep whatever they will pay interest on in my accounts, but any positive amount is acceptable.
You could open a TSB account and get 5% on that £1500, an extra £30 a year.

nichow80

Thank you for all your comments. Glad to see I'm not being stupid leaving it in there. I think I will carry on as I am doing and hopefully won't have to dig into it!

racing_blue

I aim to keep at least £5K but no more than £15K in my current account.

Current account does not pay interest & I have a mortgage @2%, so in effect it is costing me about £200 per year to keep an average balance of £10k. I kind of consider it worth it for peace of mind, but possibly that's a personality thing.

Anthorn

nichow80 wrote: »

Hi Newbie Here,

I changed bank account a year ago from NatWest to Nationwide. Initially Nationwide would not give me an overdraft (had high debt then but all paid off now) :beer:.

I started to save an amount each month and leave this in the account (FlexDirect) to act as my own personal "overdraft", this over the course of a year amounted to £1,500 which was earning interest. Nationwide have now offered a massive £5,000 overdraft (which I will have on account, not use but will keep for the absolute of emergencies).

My 'dilemma' now is I have trained myself to see that £1,500 balance at the end of a pay month as absolute minimum for so long I am loathed and 'scared' to remove it and have been keeping my minimum balance at this figure. This account is now FlexPlus (benefits are in constant use) so still earning 3% on this balance.

My question is what figure do most people leave as the minimum? I know this might sound odd, but I feel i need others advice either way.

Be gentle!

Rainy day fund which I am currently expanding. My new calculation is enough to last for three months including payment of bills. But note that part of my income is a state pension which is a steady income whatever happens.

You're going to have to re-evaluate the relationship of savings to debt which you will see a lot on MSE. A lot of people on MSE including Martin himself would tell you to spend your savings on clearing debt and avoiding debt but that makes a mockery of the rainy day fund and leaves nothing to fall back on in an emergency. Note here I'm referring to debt and not bad debt.

Personally, I agree with the ethos found to great effect in Credit Unions and that is to preserve savings held for a particular purpose or goal while taking out credit only when needed as opposed to wanted.