Saving for Emergency Fund

Senseicads

I know most of the advice is that you should have between 3 and 6 months worth of your salary as an emergency fund. I also assume that this is also between both myself and my partner combined? Our monthly income is around £5750 a month. that means our emergency fund should be between £17250 and £34500.  That seems massive!!! I know you can't predict emergencies, but in the case of redundancy we would both get big payouts, we have critical illness cover through our jobs, and death in service etc.  I am thinking if something went wrong with the house that wasn't covered by insurance...it'd at the worst case maybe be a boiler replacement or something similar, although ours is only a year old...i'm just not sure...a £34500 emergency fund is required...i'm not even sure a £17250 one is needed...I was thinking maybe £5k....have I massively underestimated this?  Maybe I am just massively overthinking it too What are people's thoughts? 

Ceme3000

There isn't a correct answer. You just take a view based on your own circumstances.
Someone with a high rent or mortgage to pay who isn't in a secure job and has kids will have a different number to someone else who owns their own home outright and lives by themself.
The 3 to 6 months guideline is just because it can take that sort of time frame to find another job and it would allow you to temporarily sustain the same lifestyle while job seeking, and have money to fix the boiler should it go pop in the middle of winter.

Linton

I suggest 6 months expenditure is a better guide than 6 months salary.  If you both lose your jobs you wont have tax, pension contributions etc.  You just want sufficient money to last you out until you find a new job.

onwards&upwards

Work out what you would need each month to survive and pay the bills you are committed to.  Multiply that by 6 (or better 12) and that’s what you want in your emergency fund.

With that income though, you should surely be saving a pretty big chunk each month anyway?  Are you both paying into pensions too? 

katsu

If you save £5k for emergencies, you are assuming nothing goes wrong for more than one month or is relatively self-contained.  What other savings do you have?  How do you plan to finance purchases such as a new car in the future for example?

In terms of an emergency fund: what can go wrong?  If your car breaks down, do you have cash to repair it?  If you get ill, not critically but say can't drive to work for a month or two, will your income drop?  What if a relative gets sick and you want to ask for unpaid leave to spend time with them?  

Personally for peace of mind I like having a lot more in savings.  When I was made redundant I was able to keep paying out for some expenses and look for a job without worrying about running out of cash.  

3 months' expenses is a good target to save I think.  

Personally I just keep saving every month as I like to have savings and feel secure.  I think until you have FIRE/enough to retire on, there is no downside to savings

Senseicads

Yeah. We’ve just paid off our debts by saving. And finished off a renovation on our house. So we have that cash spare now. I think we will prob be putting £750-1000 aside now. We’ve both got very good pensions through work. So we can now start putting money aside. All the things I’ve seen say once debt paid out money aside for emergency fund hence me asking the question. I think maybe you are right, just save it and keep on saving it now. See where we get to? Maybe think about over paying on the mortgage or something like that.