Emergency Fund

Rofo87

Hi all,

I'm looking at getting a bit more financially stable by having an emergency fund because currently I have nothing except for a Credit Card for a back-up strategy. I'm aiming for 3-6 months worth of bills eventually but to start with need to get 1 month of bills in a savings account.

My question is, do you have an emergency fund in a savings account that is easily accessible or do you have a separate account for it? Also how long do you expect to have an emergency fund built up, in a perfect world where nothing ever breaks down. (I know that last part is variable depending on income and what you can afford to put away)

Thanks

xylophone

Aim at six months' salary.

Use an interest paying current account - there are several available.

MP2609

Hi Rofo

I currently have about 1-2 months in the easy access account with the bank I have my main bank account with. I myself am trying to increase my emergency fund while saving for a house deposit at the same time so its all about getting the balance right.

I am not really concerned about the interest rate on the account as I just prefer to have quicker access to account linked to my main current account.

I reckon into will be another 1-2 months before i have it fully built up, but obviously it depends on everyones commitments.

Novice_investor101

I have £500 in a bog standard, rubbish interest paying savings account that I can access immediately by transferring it to my current account through mobile banking (that's my little problems fund ie new washer etc). Then I have 6 months salary in a defined access ISA at another bank (that's my total disaster fund)& a regular saver which gets topped up monthly for my "nice to have" fund (like holidays etc). & A stocks & shares ISA on a monthly savings plan which is my early retirement fund. & My current account for bills & monthly spends. Also have another current account that I pay £125 a month into for yearly bills like car insurance & TV licence.
Piggybacking really does work!

Dobbibill

Hi Rofo,

Welcome to the forum.

Rofo87 wrote: »

Hi all,

My question is, do you have an emergency fund in a savings account that is easily accessible or do you have a separate account for it?

This is very much a case of 'horses for courses' and will vary for many posters.

For me the answer is both - it's in a separate account but also easily accesable.

Also how long do you expect to have an emergency fund built up, in a perfect world where nothing ever breaks down. (I know that last part is variable depending on income and what you can afford to put away)

Personally it's an ongoing thing. Save it, leave it, only use in emergency, top up if/when required.

If you have other funds running alongside the EF then the need to use it should be lessened.
ie -
*3-6 EF used if income reduced due to job loss or similar.
*House savings - funded monthly, used if something is in need of repair/refurbish
*Basic EF (£1000) used if white goods etc breaks down unexpectedly and cannot be replaced via the House savings above.

I'm sure others will be along shortly with differing views - it's personal preference. Find what works for you

Novice_investor101

That should say piggybanking...

Anthorn

Rofo87 wrote: »

Hi all,

I'm looking at getting a bit more financially stable by having an emergency fund because currently I have nothing except for a Credit Card for a back-up strategy. I'm aiming for 3-6 months worth of bills eventually but to start with need to get 1 month of bills in a savings account.

My question is, do you have an emergency fund in a savings account that is easily accessible or do you have a separate account for it? Also how long do you expect to have an emergency fund built up, in a perfect world where nothing ever breaks down. (I know that last part is variable depending on income and what you can afford to put away)

Thanks

Looking back to 2008 the banks went down, my employer's bank went down, my employer went down and I lost my job. I had nothing liquid to fall back on so I went down and I became a financial untouchable.

One of my priorities when rebuilding my credit history was an emergency fund and I started building that as soon as I could. In short, it makes sense to have one.

Cut to the present: A multiple of salary doesn't work for me. I calculate my total monthly outgoings and multiply that by 6 which means that I can carry on for 6 months if the worst happens again.

Lastly, it doesn't work for me to have to wait for access to an emergency fund. If there's an emergency I need it immediately. So I keep it in an instant access savings account. Not much interest but there you go: It's not primarily an account for saving but an emergency fund.

TheShape

xylophone wrote: »

Aim at six months' salary.

Use an interest paying current account - there are several available.

This is a good place to start. If you had, for example, a Club Lloyds* current account as your main current account you could fill it to £5000 @ 2% and it could operate as both a current account and an emergency fund. You could also add Club Lloyds monthly saver and monthly saver accounts @ 3% and 2.5% respectively to extend your emergency fund/savings fund.

*Other interest paying current accounts at better rates are available.

badger09

I'm in the fortunate position of no longer needing an emergency fund. (And before anyone asks, no, I'm not bragging:cool:)

However, if I did, I would agree with Anthorn rather than with xylophone.

Aim for 6 month's (necessary rather than discretionary) expenditure rather than 6 month's salary. Sadly, for many, those two figures are very close together.

enthusiasticsaver

Interest paying current account for us. In a few weeks time though I am retiring early and DH already early retired so we will both be in receipt of DB pensions. The emergency fund will therefore become our drawdown fund to supplement pensions/investment income until other pensions and state pensions pay out.

enthusiasticsaver

Before deciding on a blanket amount for an emergency fund it will be different for everyone depending on circumstances.

If you are self employed or working for a small private company with perhaps low sick pay I would aim for 6 months salary. If you work for a large organisation with good sick pay or the public sector then 3 months should be sufficient.

If you run a car or own a house then having a few thousand for essential repairs is sufficient and maybe a deposit on new car. If you don't have a car and rent then having enough cash to pay a deposit on a new rental is a good idea.

Finally if you have debt then I would prioritise this over building a large emergency fund unless all the debt is on 0%.