Safety net savings - how much?

pmf1974

Morning,

Im interested in gauging people's thoughts on how much you think you would need as "safety " savings (something big happens).

Currently I have a joint account which is essentially money which is free to be spent and have fun. I also have a "Safety" pot. And there is also a " long term" pot aimed for future (retirement etc).
Due to poor interest rates in savings I'm looking at perhaps using the long term pot to pay off a chunk of mortgage. But interested in what people feel they need behind them.

Alexland

Depends on your outgoings and future job prospects. For example those unlikely to be easily re-employed with big mortgage payments, school fees and onerous car leases would need much more.

Sea_Shell

The minimum amount of emergency savings recommended around these parts is 6/12 months of outgoings, I think. But then from that point on, it's very personal to ones own situation, affordability, goals and how your money is saved/invested.

At the other end of the scale, many of us reaching the drawdown phase of our retirement, want multiple years worth of outgoings available in cash products, in case of (stock) market downturns.

if you have no debts (other than mortgage), and can afford to save, then i'd say it's prudent to save as much as you can for as long as you can.

Some also advocate NOT paying down the mortgage if you can get a better avings rate than you're paying. Personally we got shot of the mortgage ASAP, and have been mortgage free for over 10 years now.

Saving is a habit IMO and a good one to get into.

Sanctioned_Parts_List

If I can liquidate the contents of an S&S ISA, a higher-interest notice account, or P2P investment in 30 days or so, why would I need any more than 2 month's worth of cash, given the below-inflation interest rates on most cash accounts?

btcp

Both my husband and I have cash of roughly 10 months outgoings. I put it in Santander 123 so I have at least some interest on it. The rest goes to the mortgage as I am the one of those who wants to pay it off faster. With bonuses and pay raise coming, I am planning to put more in pension.

Robert_McGeddon

Sanctioned_Parts_List wrote: »

If I can liquidate the contents of an S&S ISA, a higher-interest notice account, or P2P investment in 30 days or so, why would I need any more than 2 month's worth of cash, given the below-inflation interest rates on most cash accounts?

You wouldn't as far as the notice account or P2P are concerned. These are essentially "cash equivalents". But the S&S ISA is inside a beneficial tax wrapper - if you use that you may not be able to recreate it in the short term.

Depends as well, I suppose, on how much you think you might need. If the purpose of holding cash is to cover a sudden personal/domestic emergency then maybe £20-30K is sufficient. If the purpose is to cover selling investments during a crash then somewhat more may be appropriate.

atush

3 months outgoings minimum. Building up to 6/12 eventually.

Due to poor interest rates in savings I'm looking at perhaps using the long term pot to pay off a chunk of mortgage. But interested in what people feel they need behind them.

I'd look at perhaps S&S isas and pensions instead of overpayuing a low rate mtg.