Bond index fund vs savings account

btcp

dunroving said:

btcp said:

Thank you, looks a bit more complex than I thought. Letting emergency money sit without any interest could be a better option. 

If it's specifically emergency money you're talking about, then yes, surely you want minimal risk, i.e., low-interest cash deposits. By definition, emergency money is cash you might need tomorrow, or the day after. Or in 6 months. 

Yes I am talking about emergency money which most of us should try to save up. Another reason could be a big purchase, ie a house but  I am undecided if I need a bigger one.  I have ISA, stocks and pension funds for a long term. Technically, I can sell some of those in the emergency.

And thank you for answering my question! This thread turned into an economics debate, which is interesting to follow but less relevant to my immediate need  

masonic

btcp said:

dunroving said:

btcp said:

Thank you, looks a bit more complex than I thought. Letting emergency money sit without any interest could be a better option. 

If it's specifically emergency money you're talking about, then yes, surely you want minimal risk, i.e., low-interest cash deposits. By definition, emergency money is cash you might need tomorrow, or the day after. Or in 6 months. 

Yes I am talking about emergency money which most of us should try to save up. Another reason could be a big purchase, ie a house but  I am undecided if I need a bigger one.  I have ISA, stocks and pension funds for a long term. Technically, I can sell some of those in the emergency.

And thank you for answering my question! This thread turned into an economics debate, which is interesting to follow but less relevant to my immediate need  

You can get approaching 1% tax free using premium bonds, which are close to easy access, though it would be advisable to hold whatever money you think sensible for use in real emergencies when you may need the money at very short notice. Beyond that choices are very limited, so as someone else mentioned, it would be best to limit the size of your emergency fund to what you feel you need to fulfil that purpose.

Alexland

masonic said:
Beyond that choices are very limited, so as someone else mentioned, it would be best to limit the size of your emergency fund to what you feel you need to fulfil that purpose.

Unless you aim to accumulate so much emergency money that you can buy a private island and start an international rescue operation fully equipped with a range of thunderbird vehicles well suited for any emergency...

btcp

Alexland said

Unless you aim to accumulate so much emergency money that you can buy a private island and start an international rescue operation fully equipped with a range of thunderbird vehicles well suited for any emergency...

I am very far from these ambitions. I mentioned around 20k+, I don’t t see a need to keep more cash. Unless of course I decide to mov a house, then I’d need to save more/sell some funds. 

btcp

masonic said

You can get approaching 1% tax free using premium bonds, which are close to easy access, though it would be advisable to hold whatever money you think sensible for use in real emergencies when you may need the money at very short notice. Beyond that choices are very limited, so as someone else mentioned, it would be best to limit the size of your emergency fund to what you feel you need to fulfil that purpose.

That’s my understanding too. I was hoping to have less accounts so it’s more manageable. I’d need to open a new one for premium bonds, I do t think I can get them through Vanguard? 

dunroving

btcp said:

masonic said

You can get approaching 1% tax free using premium bonds, which are close to easy access, though it would be advisable to hold whatever money you think sensible for use in real emergencies when you may need the money at very short notice. Beyond that choices are very limited, so as someone else mentioned, it would be best to limit the size of your emergency fund to what you feel you need to fulfil that purpose.

That’s my understanding too. I was hoping to have less accounts so it’s more manageable. I’d need to open a new one for premium bonds, I do t think I can get them through Vanguard? 

Pretty Sure that you can only buy and hold premium bonds through NS&I. You can hold up to £50k in premium bonds. I like having some because they are a "fun" way of holding cash, even though the nominal interest rate is only 1%. Every month on prize draw day, I get just a little bit excited. 

grumiofoundation

btcp said:

masonic said

You can get approaching 1% tax free using premium bonds, which are close to easy access, though it would be advisable to hold whatever money you think sensible for use in real emergencies when you may need the money at very short notice. Beyond that choices are very limited, so as someone else mentioned, it would be best to limit the size of your emergency fund to what you feel you need to fulfil that purpose.

That’s my understanding too. I was hoping to have less accounts so it’s more manageable. I’d need to open a new one for premium bonds, I do t think I can get them through Vanguard? 

https://www.nsandi.com/products/premium-bonds

https://www.moneysavingexpert.com/savings/premium-bonds/

Premium bonds are not available through vanguard (as I think you say in post - I initially read as do not don’t) 

I think if you are confused  might be due to the different usages of “bonds” - all of which are different products.  Bonds could be savings accounts (capital not at risk), government bonds, corporate bonds and more....

btcp

grumiofoundation said:

I think if you are confused  might be due to the different usages of “bonds” - all of which are different products.  Bonds could be savings accounts (capital not at risk), government bonds, corporate bonds and more....

I was looking into Vanguard global bonds fund in particular as I felt it should be a balanced one, didn’t plan to get individual bonds. 

btcp

Looks like premium bonds carry no risk of losing money, plus a potential to get extra. You can also instantly access it the same as cash. A better option than having cash with zero interest, if you are lucky enough.

Another_Saver

btcp said:

grumiofoundation said:

I think if you are confused  might be due to the different usages of “bonds” - all of which are different products.  Bonds could be savings accounts (capital not at risk), government bonds, corporate bonds and more....

I was looking into Vanguard global bonds fund in particular as I felt it should be a balanced one, didn’t plan to get individual bonds. 

Which is a very low risk option because it's almost all government bonds, and all the foreign currency exposure is hedged back to £. Problem is the yield to maturity is only 0.7%, and after the total fees if 0.44% if you buy it via the vanguard platform, you'll end up with 0.36% average over the maturity of the bonds in the fund ( 9 years) at most (some will default).
Whereas £20k premium bonds has a 99.8% chance of winning at least £500 over 5 years, which averages out at 0.5%, but they may lower the prize rate.