What type of accounts do people use to hold their Emergency Funds?

DireEmblem

Hey all,

Just wondering what the general view is on this. I’m currently reviewing my 2019 savings/expenditure with a plan to set out my 2020 targets, and noticed of all my accounts, my 6 month emergency fund lost value. It earned 1.5%(now dropping to 1.35%), while U.K. inflation for 2019 was 1.8%.

I’m now thinking if I should put part or all of this into a Stocks and Shares ISA. Ok so it won’t be as quick to access funds - I would have to wait a few days to sell any shares in the market if needed, and the value could go up as well as down, but longer term it should maintain its value/grow better.

Interested to see what others do. Thanks!

Bravepants

If you put it into an ISA in a S&S fund on Monday and the value fell by 25% on Tuesday would it make you happier than your 1.35% in Marcus or not?

Bravepants

Or put it another way...suppose your emergency fund is worth £5000, and a storm blows in and damages your roof to the sum of £5000. You go to your ISA pot and see that you have £4000 in there because your investments have fallen from £5000, perhaps only during the previous week, how will you fund your roof repair?

Alexland

Although the juicy 5% regular savers are ending theres still a bunch of easy access 2%+ regular saver accounts with Club Lloyds, Santander 123 World, etc which we run with offset dates. When they mature we just dump the money into long term S&S accounts and start again.

Zero_Sum

Emergency funds arent long term though.

S&S ISA should be used for things like retirement.
For an emergency fund, the best place probably still is Marcus.

crumpetman

Depends on the type of emergency, most things I could cover with credit cards so I wouldn't need access to lots of cash immediately. I still have the TSB accounts which pay 3% so that would be my source of emergency cash.

Even an easy access account like Marcus can take over 24 hours to move funds to your linked account so having access to some of your cash via high street bank or ATM is a good thing.

Zero_Sum

crumpetman wrote: »

Depends on the type of emergency, most things I could cover with credit cards so I wouldn't need access to lots of cash immediately. I still have the TSB accounts which pay 3% so that would be my source of emergency cash.

Even an easy access account like Marcus can take over 24 hours to move funds to your linked account so having access to some of your cash via high street bank or ATM is a good thing.

Marcus is unlike most easy access accounts in that its pretty much instant access. TSB is limited to £1500, but yes of course put first £1500 in there.

But when people talk of emergency, its for big stuff like redundancy

learningmoneybasics

I use a combination of Current Account / Marcus / Premium Bonds. I keep them topped up and anything extra is then invested.

Audaxer

DireEmblem wrote: »

It earned 1.5%(now dropping to 1.35%)

If you put money in a Marcus account at 1.5% I think it should still be earning 1.5% interest. I put money in a Marcus account at 1.45% and it's still earning 1.45%. I think that it's only gone down to 1.35% for new accounts.

Cash-Strapped.T32

My emergency pot lives in my Help to Buy ISA, 2.5%, iirc.

When I part-transferred the balance over to a LISA, I kept a token balance in the cash account & continued to top it up each month with between £100-200.

Plan was to save about £3k in there as ready cash at a rate that isn't being eaten alive by inflation, and then once that is in place I can increase my LISA contributions to £333, and increase my additional pension contributions a bit, with the money not going into the H2B.

All being well, that should happen just in time for next April.

I know that having £3k in the emrgency fund is a pretty arbitrary amount to decide upon (if I don't put any income into savings, it is about 4 months' outgoings), and like so much it's largely psychological.
Keeping it in the H2B is a bit of a self-manipulation as well;


Because I can only put money in at a rate of £200 p/m max, it puts it just one step further away than other instant-access accounts I use, even though that step is purely in my own mind. :rotfl:

YorkshireBoy

Audaxer wrote: »

If you put money in a Marcus account at 1.5% I think it should still be earning 1.5% interest. I put money in a Marcus account at 1.45% and it's still earning 1.45%. I think that it's only gone down to 1.35% for new accounts.

OP probably opened it 12 months ago and didn't renew the bonus when they had chance last year?