Cash Savings

Rich1976

So there is a lot written about how much someone should keep in cash Savings and the general consensus seems to be a maximum of 6 months in an emergency fund but no more than this as any extra should be invested in isas and pensions.
But what is never mentioned for some reason is how things such as annual expenses,  holidays, replacement cars and home Improvements are to be dealt with as you wouldnt necessarily use your Emergency fund for these so why do people only recommend 6 months expenses ?. So what is the solution please?
We have about 7.5 months finally saved up in an emergency fund but would to also cover the above.

El_Torro

Some people think that 6 months is too conservative, some think that more is better. If you're happy with 7.5 months I don't see much harm in this. Sure, you're limiting the amount going into your investments but if you're more comfortable with a bigger emergency fund I think that's money well spent. As long as you don't go crazy and have years and years worth of cash when you don't need to. 

Personally I err on the side that more is better. My emergency fund is quite big (compared to my outgoings) simply because I want to be able to afford a new car, or new boiler, or whatever, if I need to, even if I have recently lost my job. I also spend quite a lot of money each year on holidays and want to afford that too. If I suddenly lose my job the last thing I would want to do is also cancel a holiday that I had been planning, and perhaps even made payments towards.

There's no real "right" answer when it comes to emergency funds. Some people even make a conscious decision to have no cash emergency fund and instead rely on borrowing or their investments. Personally I think this is going a bit too far, but if it works them then fine. 

Rich1976

We do have 7.5 months allocated to an emergency refund but in reality have a further 3k on top of this which mostly was made up of a cancelled holiday from this year plus Savings going towards a replacement car in a few years. We have allocated 400 per month to cover such purposes but not sure if this is the best use of cash as we already have a further 300 per month going into pensions and isas

Robin9

@Rich1976 What form does your regular savings take ? see

moneysavingexpert.com/savings/best-regular-savings-accounts/

RobM99

Emergency Fund - depends. If you don't own a car, rent instead of buy a home, you're not likely to need money for car repairs or a new boiler/roof.

Rich1976

Robin9 said:

@Rich1976 What form does your regular savings take ? see

moneysavingexpert.com/savings/best-regular-savings-accounts/

We have our emergency fund in instant access paying 0.75% and then the 400 extra per month is currently going into another instant access with the same provider paying the same rate although I am looking at the first direct Regular saver as our current account is with them

Rich1976

RobM99 said:

Emergency Fund - depends. If you don't own a car, rent instead of buy a home, you're not likely to need money for car repairs or a new boiler/roof.

We own one car and also our own home on a mortgage but the car would need replacing in about 4 years, plus we would want to do home improvements on top of this as well as 1 annual holiday.

So my point is the emergency fund cant be used for all of this every year but every article I read says no more than 6 months Expenses in cash Savings but makes no mention of anything else that needs to be saved up for as they suggest everything above this figure has to be in investments

Robin9

Set up a series of regular savings for £200./ £250 whatever the max is and transfer these every month - I've a bunch with Santander, HSBC, Virgin, Halifax all over 2%

NottinghamKnight

Robin9 said:

Set up a series of regular savings for £200./ £250 whatever the max is and transfer these every month - I've a bunch with Santander, HSBC, Virgin, Halifax all over 2%

none of which are available currently at anywhere near that rate currently of course.

eskbanker

Rich1976 said:

RobM99 said:

Emergency Fund - depends. If you don't own a car, rent instead of buy a home, you're not likely to need money for car repairs or a new boiler/roof.

We own one car and also our own home on a mortgage but the car would need replacing in about 4 years, plus we would want to do home improvements on top of this as well as 1 annual holiday.

So my point is the emergency fund cant be used for all of this every year but every article I read says no more than 6 months Expenses in cash Savings but makes no mention of anything else that needs to be saved up for as they suggest everything above this figure has to be in investments

Perhaps worth sharing links to some of these articles, as they appear to be causing confusion if taken too literally?

IMHO there's a difference between a genuine emergency fund (for unplanned expenditure, such as job loss, ill health, etc) and savings for planned expenditure on holidays, cars, home improvements, etc, but all of those should be retained in accessible cash form rather than invested.

Robin9

NottinghamKnight said:

Robin9 said:

Set up a series of regular savings for £200./ £250 whatever the max is and transfer these every month - I've a bunch with Santander, HSBC, Virgin, Halifax all over 2%

none of which are available currently at anywhere near that rate currently of course.

but these are - there may be strings but beating the OP's 0.75% is possible.

• NatWest – 3.04%
• RBS – 3.04%
• HSBC – 2.75%
• First Direct – 2.75%