Cash Savings

Another_Saver

Regular expenses should come out of income and be factored into your budget - that includes holidays, car/boiler trouble/replacements, home improvements etc., things you know about and can plan for. You can "save up" for these items but that is separate to "savings". The idea of an emergency fund is for expenses you can't plan for as regularly, and as a buffer against job insecurity.

Rich1976

eskbanker said:

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.

That's very true. Its whatever you Google such as how much should I keep in cash Savings and everything single one only mentions the Emergency fund rather than 'savings' that are future dated Expenses at some point in the future. Even YouTube videos on saving and investing refers to just an emergency fund.

Rich1976

Another_Saver said:

Regular expenses should come out of income and be factored into your budget - that includes holidays, car/boiler trouble/replacements, home improvements etc., things you know about and can plan for. You can "save up" for these items but that is separate to "savings". The idea of an emergency fund is for expenses you can't plan for as regularly, and as a buffer against job insecurity.

Got you. So even though you are 'saving up' they are not really Savings in the true sense of the word. Just money that is being parked.
I'm just trying to achieve the right balance between saving in cash and investing into isas and pensions which led to the confusion.

YorkshireBoy

Robin9 said:

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%

One of those (and quite possibly two) might not be available after tomorrow of course, if a recent customer email is found to be correct.

enthusiasticsaver

I think how much you keep in an emergency fund depends on source of income, lifestyle and essential bills/living expenses and to a degree any expenditure you know will be coming up in the next year like your car being on its last legs or roof leaking or boiler coming to the end of its natural life. You could argue the last three should be in a separate savings account but we don't keep lots of different savings accounts just an internet saver  attached to our current account for things like car repairs/services/xmas and household repairs. We also have  separate instant access account elsewhere with money in for two car replacements, a porch we intend building next year and next years holidays rearranged from this year and £10k emergency savings. 

There is a difference between money allocated and saving just for the sake of saving.  We don't do that.  If it is unallocated money it is invested due to the poor rates we now get.  Apart from our £10k emergency savings and the allocated money everything else is in sipps or stocks and shares isas. Our income is DB pensions though and that increases in 4 years time when my husbands state pension pays out and then again in 2 years time when mine pays out. 

If you are still working then I would first make sure you have 6 months of essential living expenses in emergency savings in case you lose your job.  Then the rest of any disposable income after discretionary spending could be split in the way we used to.  One third to short term savings (maybe a regular saver?), this is for things like holidays, household repairs, car repairs etc.  One third to medium term savings for things like boiler replacement, new kitchen or bathroom or to replace your car and one third for long term investing or overpaying your mortgage. This assumes no debt which should be dealt with before saving or investing. This worked for us and we found a comfortable balance between living in the here and now with nice holidays, home improvements etc but also investing for the future and we retired at 58.  Would have been earlier but we helped our children get on the property ladder and through University first. 

Rich1976

enthusiasticsaver said:

I think how much you keep in an emergency fund depends on source of income, lifestyle and essential bills/living expenses and to a degree any expenditure you know will be coming up in the next year like your car being on its last legs or roof leaking or boiler coming to the end of its natural life. You could argue the last three should be in a separate savings account but we don't keep lots of different savings accounts just an internet saver  attached to our current account for things like car repairs/services/xmas and household repairs. We also have  separate instant access account elsewhere with money in for two car replacements, a porch we intend building next year and next years holidays rearranged from this year and £10k emergency savings. 

There is a difference between money allocated and saving just for the sake of saving.  We don't do that.  If it is unallocated money it is invested due to the poor rates we now get.  Apart from our £10k emergency savings and the allocated money everything else is in sipps or stocks and shares isas. Our income is DB pensions though and that increases in 4 years time when my husbands state pension pays out and then again in 2 years time when mine pays out. 

If you are still working then I would first make sure you have 6 months of essential living expenses in emergency savings in case you lose your job.  Then the rest of any disposable income after discretionary spending could be split in the way we used to.  One third to short term savings (maybe a regular saver?), this is for things like holidays, household repairs, car repairs etc.  One third to medium term savings for things like boiler replacement, new kitchen or bathroom or to replace your car and one third for long term investing or overpaying your mortgage. This assumes no debt which should be dealt with before saving or investing. This worked for us and we found a comfortable balance between living in the here and now with nice holidays, home improvements etc but also investing for the future and we retired at 58.  Would have been earlier but we helped our children get on the property ladder and through University first. 

Thank you for the detailed response. It does make a lot of sense.
Thankfully we have no debt so have 7.5 months in an emergency fund and a further 3k making 10k in total cash Savings. 
We have £700 roughly left over each month after all bills and an amount allocated to fun money so the intention was splitting £300 to pension and Isa and then £400 to cash savings to cover annual expenses, holidays, saving up for a new car and home Improvements. But then got confused by all the articles on the web saying to only keep a few thousand in Expenses for emergencies so wasnt sure if I was allocating too much.

Emmia

I think that cash savings are a bit like a safety blanket - if you would be happier with a higher level in cash (or cash like), rather than having it tied up, stick with that. 6 months salary is also a bit relative. If you take home £1.5k a month, holding 6 months reserve in cash is £9k, if you take home £3k a month that's £18k - if you've got a fairly secure job, and are holding cash to deal with the car dying, boiler breaking etc., then depending on your fixed outgoings like rent/mortgage, you may not need to have 6 months of savings in cash, 3 or 4 months might be more than fine. 

When I earnt less, I held more as cash, rather than as investments, because "losing" money worried me (it took me significantly longer to earn it back). Now, I earn more, and I have a good level of cash savings, so I feel more able to invest in S&S ISAs etc., as the movements of the stock market don't worry me as much. 

YorkshireBoy

Rich1976 said:

We have £700 roughly left over each month after all bills and an amount allocated to fun money so the intention was splitting £300 to pension and Isa and then £400 to cash savings to cover annual expenses, holidays, saving up for a new car and home Improvements. But then got confused by all the articles on the web saying to only keep a few thousand in Expenses for emergencies so wasnt sure if I was allocating too much.

Is that going to be enough? I think you said earlier that a large part of the £3K extra you currently have was due to a refund from a cancelled holiday this year. Doesn't leave a lot left to cover for car savings, home improvements and annual expenses (whatever they are?...maybe insurances, car maintenance etc?)

Rich1976

YorkshireBoy said:

Rich1976 said:

We have £700 roughly left over each month after all bills and an amount allocated to fun money so the intention was splitting £300 to pension and Isa and then £400 to cash savings to cover annual expenses, holidays, saving up for a new car and home Improvements. But then got confused by all the articles on the web saying to only keep a few thousand in Expenses for emergencies so wasnt sure if I was allocating too much.

Is that going to be enough? I think you said earlier that a large part of the £3K extra you currently have was due to a refund from a cancelled holiday this year. Doesn't leave a lot left to cover for car savings, home improvements and annual expenses (whatever they are?...maybe insurances, car maintenance etc?)

Yes that's true. This is why I am allocating 400 each month to cover the future costs you mentioned above so just under 5k a year?

NottinghamKnight

Robin9 said:

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%

Yes, each of which requires a current account and some have funding requirements for those current accounts. The first two give you the luxury of saving £50 per month and the last two are likely to be pulled in the next week or two, almost certaonly before they could be opened given the dilatory speed at which HSBC systems work.