How long to save for?

jls85

I was about to put my house on the market when COVID started. The reason for the sale is twofold  - firstly to move in with my boyfriend; and secondly to pay off the last of my debt.

This is obviously now on hold, and I am using the lack of expenditure to save up as much as I can to build an emergency fund and put the rest towards my debts before the house sale can happen. But I suppose my question is, how much should I be looking to put towards each?

I currently have a loan for £10k at 15% and a car loan for £6000 at 6.9%. I have saved up roughly £3700 and my plan was to pay the car back once I’ve saved enough to pay it in one to give me a boost. But should I forget that and just focus on building the biggest emergency fund I can given the current climate? Or a mixture of the two?

My job is secure for the moment and I’m working from home but there is so much uncertainty who knows what the future holds.

J x

theoretica

If you are paying 15% on the loan and 6.9% on the car you would be better off putting the money towards the loan.

sharpe106

Pay of the loan over the car. Can you not pay of part of the loan with the money you already have saved? Will cut down a fair bit of interest payment. Although you may want to keep some for emergency savings.

jls85

Ok thanks I’ll put it towards the loan instead if that makes more sense. How much do people recommend for emergency savings? I usually aim to have £1000-£1500 but I’m not sure if I should be more cautious given COVID etc?

shoppingobsessed2020

My goal for an emergency fund is to start with a months worth of expenses (mortgage, bills etc) and then build it up to 6 months worth of expenses once we are debt free (Bar the mortgage) and then will see what the situation is.  

Mahsroh

Agree with the other comments. Definitely focus on the loan as you’ll save a lot in the long run. 

In terms of an emergency fund I don’t think there is a right or wrong answer. It depends on your own circumstances (what your expenses are, how secure your job is etc). Personally I like to keep at least one months salary as an emergency fund, though this can fluctuate when I get unexpected bills (such as car maintenance, boiler repair etc.) 

For me, one month generally works as I’d like to think my job is reasonably secure and I work in an industry where jobs are generally readily available (pre COVID-19 I was getting minimum 1 call a week from recruitment agencies), but depending on your own circumstances you may feel that you need 3 months, for example.

in_need_of_direction

I calculated my emergency fund based on 4.5 months expenses.  The expenses were calculated based on what these would be if I wasn’t working. 

sharpe106

I always think 3 months living expenses (that everything food bills etc) if you have nothing coming in at all is a good amount but as you have debt and a fairly secure job I would probably just go for a month.