£12k rainy days fund - premium bonds?

muffinek

Ive got my rainy days fund of £12k in my saving account at 0.01% so well below the inflation rate. I cant afford to lose this money so investing in shares is out of question. I dont plan to withdraw it any time soon but having said that you never know so I would need easy access. 

I did some research and I struggle to find any saving accounts fitting my criteria. The one I found give about 0.7% so £84 a year interest.

I used premium bonds calculator on moneysaving website it looks like I may be getting about £100 a year from premium bonds although it isn't guaranteed.  

Are there any better options for me out there than premium bonds? Unfortunately I dont have time to transfer small amounts to multiple saving accounts that offer better rates. 

Albermarle

Probably PB's are your best bet . Average return is 1 % but effectively it is around 0.8% + an infinitesimal chance of winning a Million
.Premium Bond Probability Calculator. Unique tool predicts what you'll win plus NEW 'luck test' (moneysavingexpert.com)

Alistair31

That’s where I hold a similar amount for emergencies. I can’t be bothered shuffling it around regular savers for a pittance in interest. 

DireEmblem

I think some people on the forum have mentioned 'access issues' due to NS&I being overloaded.

In that sense, you could spread the funds over a few well known accounts.  A Virgin Money bank account pays 2% on balances up to £1000.

Alexland

Yes worth spreading your emergency pot across at least 2 providers incase there are any unexpected withdrawal delays. Especially if using a provider with an exceptionally poor customer service reputation.

DiggerUK

I'm not a big advocate for the need of an emergency fund, but you do have £12k that should be best put in PB's as opposed to a 0.01%  option.

The other suggestion I make is to put some of that in cash. I only do so because we have decided to increase our cash to hand; the reason being we suspect it may be difficult at some point going forward to obtain cash easily.

I acknowledge it can  be viewed as an end of the world as we know it defence. But the difference between PB's half promise  of 1%, a guaranteed <2%> loss due to inflation with cash, or a mere <0.01%> in a savings account  becomes a difference without distinction..._

mrkds

I add my vote to spreading money across several accounts. As well as marginal increase in interest, you have some security if you have access issues with a particular provider. I had trouble withdrawing funds for over a week from NS&I which was suposed to be easy access. Its put me off putting money in there  again (or at least anything I would regard as emergency fund). 

muffinek

I have opened premium bonds account but still considering my options and now I am wondering if putting monetmy into Vanguard Lifestle 20 would be better option? Looking at past performance I could expect about 6% return and if I understand correctly risk to my capital would be very low as this fund is mainly bonds, am I missing anything here? Is there a scenario here where my £12k becomes £5k overnight?

wjr4

muffinek said:

I have opened premium bonds account but still considering my options and now I am wondering if putting monetmy into Vanguard Lifestle 20 would be better option? Looking at past performance I could expect about 6% return and if I understand correctly risk to my capital would be very low as this fund is mainly bonds, am I missing anything here? Is there a scenario here where my £12k becomes £5k overnight?

An emergency fund should not be invested IMO

jsmith9

Have you thought of an umbrella fund ?

Albermarle

muffinek said:

I have opened premium bonds account but still considering my options and now I am wondering if putting monetmy into Vanguard Lifestle 20 would be better option? Looking at past performance I could expect about 6% return and if I understand correctly risk to my capital would be very low as this fund is mainly bonds, am I missing anything here? Is there a scenario here where my £12k becomes £5k overnight?

Although bonds have traditionally been less volatile than shares , they are not a risk free investment . In certain financial conditions they can also go down in value. Some people have been predicting this will happen for some time now, although so far it hasn't . In fact the 7% VLS 20 has grown this year is proof of that .
Anyway emergency cash should stay as cash ( or PB's) . If you want to invest long term then that is a separate subject .