How much savings is good?

redrabbit29

I was thinking earlier about the ideal amount of savings, I don't mean when should you stop, I mean in terms of like an emergency fund.

I've heard people say that it's good to have 3x your monthly salary, so if you get £1000 net per month, it is good to have £3k just in case. Obviously it's best to have as much as possible, but it's just something to aim for, and I would like some money set aside as an "emergency" fund.

Hope you don't think my question is too strange

ds1980

£3 million id like

wombat42_2

Yes you should have at least £3K for starters - obviously the more the better. It is referred to as "rainy day" money.

redrabbit29

wombat42 wrote: »

Yes you should have at least £3K for starters - obviously the more the better. It is referred to as "rainy day" money.

£3K for starters?

Wow, that is a lot of money. I need to save up for a house too. Better get saving then.

ds1980 - how far are you off £3 million?

Garnet_Gem

"Enough" savings is enough money so that you don't need to borrow if you hit a money crisis. It'll be a different amount for different people but I think if you can cover 6 months of bills you'd feel more secure.

Fat_Girl_Slim

I actually heard that you should have 6 x net monthly salary in savings.

A rule of thumb I've recently subscribed to is that the ratio of 'risky' to 'safe' savings you have should reflect your age. The older you are, generally speaking, the less risky your savings should be as you have less chance to pick up the pieces if something goes 'bump'. Technically, the younger you are the more of a risk you can take although your circumstances may dictate otherwise.

So if you are 25 have 25% of your savings in relatively safe places (building society, Cash ISAs) and 75% in places such as Unit Trusts or Stocks & Shares. If you're 60 years old the proportion should be 60% 'safe' and 40% 'risky'.

As a result I've been diversifying some of my totally safe savings into slightly more interesting investments and the results, so far, have been rewarding.

topher_2

I'm working on 3 months bills (inc food etc) as my "Rainy day" fund. For me this is much more manageable than 3 months net salary! I'm in a very secure job and do aim to increase but having the above in savings helps me feel secure!

niceguyed

Fat_Girl_Slim wrote: »

I actually heard that you should have 6 x net monthly salary in savings.

A rule of thumb I've recently subscribed to is that the ratio of 'risky' to 'safe' savings you have should reflect your age. The older you are, generally speaking, the less risky your savings should be as you have less chance to pick up the pieces if something goes 'bump'. Technically, the younger you are the more of a risk you can take although your circumstances may dictate otherwise.

So if you are 25 have 25% of your savings in relatively safe places (building society, Cash ISAs) and 75% in places such as Unit Trusts or Stocks & Shares. If you're 60 years old the proportion should be 60% 'safe' and 40% 'risky'.

As a result I've been diversifying some of my totally safe savings into slightly more interesting investments and the results, so far, have been rewarding.

I disagree and find your logic confusing. I believe risk should always be factored to affordability and circumstances regardless of age. For instance if you were 25 as you suggest and had say £3000 which in the general scheme of things is not a massive amount, the amount you MAY stand to gain in terms of investing say 75% in shares and 25% is an ISA is negligable. This is just common sense. I would agree with Garnet Gem regarding his advice on savings.

Bottom line is if you don't understand different investment vehicles play it safe and stick with an ISA especially with the favourable interest rates. If you have money put aide consider getting advice from an IFA.

ds1980

redrabbit29 wrote: »

£3K for starters?

Wow, that is a lot of money. I need to save up for a house too. Better get saving then.

ds1980 - how far are you off £3 million?

Depends if my euro millions ticket has come in!

PasturesNew

I'd say 3 months' takehome pay + £2,000 for "usual emergencies" like complete car breakdown/theft or boiler death.

So, £5k.

Yes, it's a lot... but bearing in mind one of your later statements about saving for a house, you'd DEFINITELY want to be able to lay your hands on this much at some point in the first 10 years of house ownership.

redrabbit29

Well, I'm 23. I have a little money in savings (a little, just gotten out of my overdraft). I have in fact about £1400 in savings (£1k of which is in an ISA). I should be saving much more each month now, as I am out of debt meaning I can stop paying money to the overdraft I had.

Eventually I think it would be worth buying a house because at the minute I'm paying nearly £400 in rent a month.

I don't have any money invested in stocks or shares or anything like that. To be honest, I don't really have much of a clue how that works!