How much Buffer should you have?

alxx_b

Hi peeps

I was wondering how much financial 'buffer' one should accrue for emergencies?

I'm hoping to have a little spare income soon and while I'd love to overpay my mortgage, I am also aware that it is useful to have a little stashed away in case of emergencies (such as career change etc).

How much does everyone think is a suitable amount, and how long did it take you to save up?

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mrsbee17

Long term, it'd be good to get 3 months expenses in case of job loss etc., though I do think £1000 is a great start for any things that pop up (car problems, washing machine bust...).


Personal opinion but I've noted plenty of people saying £1000 EF in the past.


I put £50 a month away as a standard and any extra I get goes in to top it up if necessary. It took me around 6 months to get there as I dipped into it and had a bonus from work so built it back up.

HappyMJ

alxx_b wrote: »

Hi peeps

I was wondering how much financial 'buffer' one should accrue for emergencies?

I'm hoping to have a little spare income soon and while I'd love to overpay my mortgage, I am also aware that it is useful to have a little stashed away in case of emergencies (such as career change etc).

How much does everyone think is a suitable amount, and how long did it take you to save up?

What's the largest emergency expense you can envisage?

Losing your job is an emergency...you'll need another one ASAP. That for most people takes about 3 to 6 months to find one and you need to cover your expenses until you get another job. You can usually get contributions based JSA for 6 months which can help but if you're used to living on £30,000 a year or more then £75 a week just isn't going to help pay the mortgage and the bills.

You can also get sick pay to cover you if you are unable to work due to illness but that doesn't last forever either.

You could also choose to stop paying your unsecured creditors when you're out of work but that will destroy your credit rating.

My figure is £5,000 to £6,000. I don't feel comfortable when my current account balance drops below that so I keep a balance between those two numbers all the time.

How long did that take to save? ...about 5 years saving £100 per month. About 5% of my net (take home) income.

Mortgage rates are so low that you can usually earn more in interest than you are paying on your mortgage. I earn 6% in regular saver accounts and 5% in current accounts. There's not many mortgages at such a high rate of interest that most people would actually save more by not paying the mortgage off.

Hermia

I would say enough to cover 6 months. It does depend what work you do. If your skills mean you can get plentiful cash-in-hand work than maybe you could get by on less. If you work in a field where police checks are needed or where the recruitment process tends to move slowly than you definitely need a bigger buffer.

BettyBones

Like MrsBee I put away £50 a month as standard. It's set up as a standing order from my current account to my savings account so it just gets paid like a bill. I then add odds and bods to it as and when I can. I've been doing this since last May and the balance is currently sitting at just shy of £1000. That's not bad as a start. It would probably cover a minor emergency, like unexpected car repairs or the boiler breaking down, but wouldn't cover me for long if I lost my job.
When I got my first job (oh so many years ago) my dear old Dad gave me this advice. He said 'if you always keep a box of eggs in the house then you've always got a meal and if you always keep 5% of your pay n the bank then you've always got enough money to buy the eggs! I didn't really understand what he meant back then... but I do now! Oh how I wish I'd got into the habit of saving 5% of my pay each and every month...

LuckyPenny

You could look at worst case scenario of your job becoming redundant https://www.gov.uk/calculate-your-redundancy-pay I reckon by this I will get £6k if I were to b made redundant today. So that would keep me going a fair while.
You are best to look at your Company Sick Pay Policy to see whether you get more than the statutory. I get 15 weeks full pay but then I also have a private ill health policy. The other worst case scenarios I suppose are a broken car, large appliance and £1k should cover that. So I reckon £1k plus depending on your calculations of sick/redundancy scenarios versus your monthly outgoings.


Btw I have no emergency fund :-( putting all my energies into paying of car loan and then on to the mortgage.

theoretica

Does your mortgage have any flexibility? If you can take overpayments out, or even claim payment holidays using them then mortgage overpayments can double as part of your emergency fund.

YORKSHIRELASS

Depends on whether you are in debt or not. I have £500 set aside which would cover most likely emergencies such as a car bill, new washing machine etc. I just cant see the point in saving any more than that when I have credit card debt.

However, when I get out of debt I will save like a demon. I never want to be in this position again.

The other question is what other options do you have if something major went wrong? I still do have access to quite a bit of credit and my parents are comfortably off and would always help out. Neither are options that I would be keen on but if we are talking about a situation where we couldnt feed the kids or pay the mortgage there are things that I could do.

Fosterdog

I don't like my fund to drop below £2000, ideally I prefer it around the £3000 with another lump of at least £2000 in a savings account not as an emergency fund but more for any treats, days out holidays etc. But it could be used as an emergency fund if either of us were to be out of work at all.

I'm about to completely empty my savings on a house deposit and will have to eat into a little bit of the emergency fund for moving and decorating expenses. But we have a plan in place to have it built up again within a few months of being extra frugal and money saving.

We are both incredibly lucky that we both get overtime most weeks, we put away £150 a month from our basic joint wage get some extra spending money each from our individual overtime pay and then top up the savings with whatever is left over. Most months we can put an extra £100-£500 away depending on hours worked and extra spending.

Once we have our mortgage I do fully intend to pay off extra each year during the fixed term and possibly another lump when it is time to switch. I want to have extra money now but I also want our 25 year mortgage paid off in 10 years knowing we then have complete financial freedom.

pollyanna24

theoretica wrote: »

Does your mortgage have any flexibility? If you can take overpayments out, or even claim payment holidays using them then mortgage overpayments can double as part of your emergency fund.

I have one of these mortgages. Took out with Nationwide in 2006. I have a hefty overpayment reserve and they say I can take it back with no question, but it always niggles at me just in case I can't for whatever reason.

I know post 2009 (or something), they changed their rules so that you have to jump through hoops to get any overpayment back.

enjoyyourshoes

If you have extra cash it might be worth generating savings through Regular savings. FD & HSBC do RS a/c at 6%. Nice little pot of cash and accrued interest at the end of the 12 month plan. Put this into high interest current account and then:-

Following year set up multiple with the savings from previous years contributing to the new ones etc.

Don't get fixated on 'buffers' etc just get into the savings habit with a goal at the end of the 12 months (it could be a trip of lifetime, new savings plan, etc etc)