Cash Savings

enthusiasticsaver

Rich1976 said:

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.

That sounds like a good split to me.  You have a decent emergency fund at £10k cash savings and £4800 going each year towards medium term savings and £3600 to pension/isa.  Is that on top of the existing pension contributions including employers? 

enthusiasticsaver

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?)

I think @YorkshireBoy makes a good point if your usual holiday spends are £3k that only leaves £1.8k a year towards car and house.  Maybe a £500/£200 split may make more sense or look to cut back somewhere else unless you need very little doing to your home and your car is fairly new.  We tend to keep ours for 6-10 years depending on how old they were to start with as we don't do as much mileage now we are retired.  

Rich1976

enthusiasticsaver said:

Rich1976 said:

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.

That sounds like a good split to me.  You have a decent emergency fund at £10k cash savings and £4800 going each year towards medium term savings and £3600 to pension/isa.  Is that on top of the existing pension contributions including employers? 

Yes the long term investments are on top of the employer schemes which aren't brilliant as they contribute the bare minimum of 4% which is also the maximum both employers will contribute.

Eco_Miser

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

I've never seen an article that says that. I have seen up to 6 months expenses for emergencies plus the appropriate fraction of what you plan to spend in the next five years.

This is because you should not be investing money you plan to spend in the next five to ten years, in case there is a big dip in the market just when you need to sell (and because there are extra costs to buying and selling investments).

So plan on covering all this month and next month's spending from cash, and on saving extra so that you've got the cash for holidays, presents, and other predictable expenses available as they arise, and six months or more expenses to cover unpredictable expenses or loss of income. In which pot you include things like the boiler bursting or the roof blowing off is up to you.

Rich1976

enthusiasticsaver said:

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?)

I think @YorkshireBoy makes a good point if your usual holiday spends are £3k that only leaves £1.8k a year towards car and house.  Maybe a £500/£200 split may make more sense or look to cut back somewhere else unless you need very little doing to your home and your car is fairly new.  We tend to keep ours for 6-10 years depending on how old they were to start with as we don't do as much mileage now we are retired.  

The 3k planned holiday was a one off due to a special anniversary. Normally holidays are 1500 to 2000 per year with some years not even that if we dont go abroad.