Emergency Savings..?

JustAnotherSaver

Obviously no right or wrong answer with this but what would cause you to dip in to your emergency savings?


I'd never considered it until years ago i read about it here. Often it was mentioned to have at least 3 months bills. I took that as great advice and changed the aim to be minimum of 3 months wages on account of i prefer to live on the safer side of things and 3 months wages is greater than 3 months bills so it'd give me a little breathing space. The plan was to hit 3 months as aggressively as i can (while contributing to other important areas) and then tone it down as i work to 6 and then 12 months. I currently have approx. 14 months to go to hit 3 months wages.


Also the plan was for it to only ever be dipped in to in the event i'm put out of work and therefore have no income. Car breaks, new fridge needed etc etc - that's what normal savings are for.




Well now i'm having the first test since starting it. I've just had a period of time off work. Enough to basically half my next pay on what it should be (paid monthly) which is bad timing as we've got a fair amount coming out this month, more than usual due to house repairs.


Now i've savings so it wont leave me dry but it'll obviously hit it. I'm considering dipping in to the emergency savings to pay myself for the time off but then part of me thinks that's a bad idea.


I'm not really asking a what should i do as i'll decide soon enough. It's more of a - what do you do?

enthusiasticsaver

Only a dire emergency would cause me to dip into emergency savings so in your case if you are on half pay and don't have enough to pay a mortgage/rent bill or other essential bill like fuel, power or council tax or food then this would count as an emergency in my book. I don't think paying yourself the difference in your pay is particularly sensible as presumably you have some leeway each month to pay for non essentials.

JustAnotherSaver

enthusiasticsaver wrote: »

Only a dire emergency would cause me to dip into emergency savings so in your case if you are on half pay and don't have enough to pay a mortgage/rent bill or other essential bill like fuel, power or council tax or food then this would count as an emergency in my book. I don't think paying yourself the difference in your pay is particularly sensible as presumably you have some leeway each month to pay for non essentials.

Yeah i do, that's why i say it wont run me dry. In terms of 'everyday savings' we have what would be approx. 4 months of my pay. That'll dip after this month because of the work we need doing on the house, so by the end of June we'll have somewhere between 3 & 4 months of my wage in 'everyday savings'. This is aside from the emergency savings i'm building which like i say, at the rate i'm putting away will take me around another 14 months to complete stage 1 if you will.



I've always just taken the hit on sick days as in recent years it's only been a day at the most. In fact in recent years it hasn't been anything as i can't remember the last day i had off sick. This is just a bit of a poorly timed annoyance

LobsterMemory

Think you're kidding yourself a bit here

If you're using "everyday savings" to cover an emergency, then they're not other savings, they are your emergency fund

I'd re-categorise your savings accordingly so instead of being 14 months away from having an emergency fund, you already have it and can then carry on saving for what ever you want, knowing that you won't need to dip into it if you;re ever short one month

Zorillo

My LISA is my emergency fund of last resort. I'd only ever withdraw it to provide a basic level of income to cover bills if I was out of work, and I sincerely hope I never have to do so.

Everything else comes out of our wages and other savings. Cars, holidays, home improvements, replacement white goods etc.

ruperts

A temporary dip in earnings which can be covered by other savings doesn't strike me as an emergency. But it wouldn't matter too much either way, whether the savings pot you use is earmarked for emergencies or earmarked for something else, the effect on your overall finances is exactly the same. I'd be more focussed on where I could cut costs to try and mitigate the effect of the income drop.

JustAnotherSaver

LobsterMemory wrote: »

Think you're kidding yourself a bit here

If you're using "everyday savings" to cover an emergency, then they're not other savings, they are your emergency fund

I'd re-categorise your savings accordingly so instead of being 14 months away from having an emergency fund, you already have it and can then carry on saving for what ever you want, knowing that you won't need to dip into it if you;re ever short one month

Excuse me?


Like i said, my emergency savings pot was set up with the thinking behind it that it'll only get used if i'm ever put out of work. I know some classify an emergency as their fridge packing in or washing machine going or car has blown up or some tiles have just blown off your roof etc but these things happen all the time in life and in my opinion if you dipped in to your emergency savings for these things then you'd never have emergency savings - which is why (for me) this pot was set up with the idea of only being touched if i'm ever out of work (for example: made redundant or sacked).


I never said i was using my regular everyday savings to cover an emergency. These savings cover 'life' or however you wish to phrase it. I know what they cover so i'm happy with that.


This is the first time since starting it that i've had considerable time off work so it was just a thought to perhaps use the emergency savings pot. That said, i hadn't decided on it, i wasn't even majorly for it ... like i said, it was just a thought.



Which then made me make this thread and see what others did. Once again like i said in the very first post - not to ask what i should do but to ask what others do, that's all.

Zorillo wrote: »

My LISA is my emergency fund of last resort. I'd only ever withdraw it to provide a basic level of income to cover bills if I was out of work, and I sincerely hope I never have to do so.

Thought you could only use your LISA from age 60 onwards? Or is that the case for you?

Sea_Shell

I think what LobsterMemory means is that however you categorise them, or whichever account they are in, any additional savings over the recommended emergency level are just.... savings!

eskbanker

JustAnotherSaver wrote: »

Thought you could only use your LISA from age 60 onwards? Or is that the case for you?

You can access the money any time, but if doing so before 60 (other than for a first-time property purchase) then there's a 25% withdrawal penalty, hence this only being considered as a last resort for emergencies....

JustAnotherSaver

Sea_Shell wrote: »

I think what LobsterMemory means is that however you categorise them, or whichever account they are in, any additional savings over the recommended emergency level are just.... savings!

Well obviously...no?


I have an account with a provider where i have this emergency pot that i speak of.



I also have another account with another provider that has your everyday type savings in. If i feel like buying myself a phone, the microwave has broken, i need a new car, we're going on holiday etc. Just general day-to-day life 'stuff'.



If your keyword is 'recommended' then what's recommended? 3 months because that's the figure that people online generally talk about? Like i said, 3 months will be the minimum. It'll then slowly build towards 6 & 12 months, that's the aim. 6 months may be 'too much' for many and 12 months certainly will be but not for me. like i said, i'll slowly build to that and i play on the what-if simply because without going in to detail i was once out of work for 6 months so i know it can happen. So recommended to me is my own personal recommendation of working towards an end figure of 12 months.


But yes, anything in the day-to-day savings account you're right - it's for our day-to-day savings

Prism

Our emergency savings are about 3 years of salary for what it's worth. Emergency being can't work for a significant period of time