Emergency fund amount

30andcounting

Hi

Just wondering opinions on what our emergency fund should be. We have about £1,500 a month on bills and food. We dont have any long terms savings as such, we blew it on a new boiler before Christmas which was £2,300.

Just wondering what our target should be. My wife is self employed and I am the major bread winner. We have a 7 month old baby.

If I was to lose my job and be made redundant I would received 4 months salary £19K gross and 3 weeks capped stat redundancy tax free (approx £1,500) I have always thought if I lost my job we could reply on that....if the business went bust or I got sacked it's a different story.

I was thinking trying to get to £5,000. Would that be reasonable?

Opinions please.

Thanks

fiestaman87

For what it's worth a guide on here suggests 3 to 6 months. :money:

https://www.moneysavingexpert.com/mortgages/mortgages-vs-savings/#fund

MovingForwards

Run with as much as you can get saved in one account. Eg 3 to 6 months.

Have a second account for house repairs and have about £3k in it.

Both will take a while to get together but you can then breathe if anything happens and bag a lower paid or temp job to keep you ticking over while searching for another job in your specialism.

Grenage

Am I the only person who has their emergency fund in an investment ISA? I know it's not immediately accessible, but at least you get some growth in the long-term. A credit card would cover me for short period I'd need to withdraw funds.



For example, 4.9k went into the 'emergency' ISA about 6 years ago, and it's now worth 7.9k.

fiestaman87

Grenage wrote: »

Am I the only person who has their emergency fund in an investment ISA? I know it's not immediately accessible, but at least you get some growth in the long-term. A credit card would cover me for short period I'd need to withdraw funds.



For example, 4.9k went into the 'emergency' ISA about 6 years ago, and it's now worth 7.9k.

I don't think it matters too much where your emergency fund is held, in terms of type of saving account.

However I would suggest that, by definition, an emergency fund should be readily accessible and not locked away in, say, a 5 year fixed bond account.

jonnygee2

Am I the only person who has their emergency fund in an investment ISA? I know it's not immediately accessible, but at least you get some growth in the long-term. A credit card would cover me for short period I'd need to withdraw funds.

The obvious risk with an investment ISA as an emergency fund is if it goes down at the same time you need it, you could lose out.

For example if you lost your job in March 2009 in the aftermath of the crash, your savings might have lost 40% - 50% of their value at the same time you were forced to withdraw them.

So ideally I think your emergency savings would be there to prevent you from needing to dip into your investment funds in the midst of a crisis.

Prism

I run my own company and I'm never less than 2 weeks away from uncertainty about work so I have a reasonable fund to cover that risk. About 50k instant access and another 50k in 1-2 year fixed term accounts.

Grenage

jonnygee2 wrote: »

The obvious risk with an investment ISA as an emergency fund is if it goes down at the same time you need it, you could lose out.

For example if you lost your job in March 2009 in the aftermath of the crash, your savings might have lost 40% - 50% of their value at the same time you were forced to withdraw them.

So ideally I think your emergency savings would be there to prevent you from needing to dip into your investment funds in the midst of a crisis.

Yes, that was a consideration, but even if the value decreased by 40% at the wrong time, after 6 years, I'd now have about the same that I originally invested.


I suppose when weighing up the likelihood of an economic nightmare vs the chances of losing my job at short notice, the former seemed less likely than the latter.

Doshwaster

It depends on a lot of your own circumstances (age, financial commitments, number of dependants etc), job security, redundancy entitlement, and how quickly you would be confident of finding a a new job if you lost yours but would have thought that a minimum of 3 months essential spending would be the absolute minimum.

20SmthngSver

I guess it depends on your circumstances. I suppose if you have a mortgage, children etc., maybe enough to cover at least three months bills? Keep in an easy access account, but one that pays 'decent' interest.

jamei305

It might be worth ignoring redundancy entitlement. You might have great expectations but what would happen if the company went bust or you got dismissed for gross misconduct.