Do you invest your emergency fund?

chelseablue

Hi all, would anyone be able to advise on my emergency fund please? 
I currently have £30,000 in my Marcus account earning 0.50% interest. 
Me and my husband both work full time, if one of us is unemployed we could cover monthly bills on the other persons wage while the other was job hunting. 
Having £30k sat in cash slowly (or quickly!) being erored by inflation earning not much interest might not be the best idea. 
Im thinking of moving most of the money from Marcus and into my S&S ISA, maybe keeping £5k cash and putting £25k in the S&S ISA. 
If I ever did need to buy something more than £5k quickly I have 2 credit cards I could use, or in an absolute disaster could get it from the ISA in around a week 
Does anyone else invest their emergency money?  

AlanP_2

No, but what you are saying is you only need a £5k emergency fund and can invest the spare £25k.

El_Torro

Investing your emergency fund defeats the purpose of having an emergency fund.

If you want to not have an emergency fund then fine, invest the money. Not something I would do but if that’s the way you want to go then the decision is yours. Don’t kid yourself into thinking you’re having your cake and eating it too though.

jimjames

Yes, for similar reasons to you although I wouldn't call it investing my emergency funds, I just run with lower levels of cash than some other people. If you're defining your emergency fund as your entire savings then that might be why your terminology is different. Emergency fund should be money you need to cover short term costs in a hurry or if you lose your job.

As I've got older that cash amount has increased but is still a very small fraction of my overall investments. Everyone has their own level of emergency funds that they feel comfortable with, if your employment is less secure or you have high expenses then you may want more. Many people have no savings at all so at least having some is an advantage.

[Deleted User]

I would argue you should have six months of salary easily accessible for it to be a proper emergency fund. I think it is a bit dangerous (but perhaps an acceptable risk for you) to say things like "If I lose my job it would be ok because". Emergencies are just that, you don't think it will ever happen but it can. The emergency fund is there for if your household loses its stream of income. In my book.

I don't use S&S ISAs but I assume it's value can go up and down dependent on the stocks. If there is a crash, they would be wiped out, the companies you work for go bust etc etc.

Linton

You dont want to take any risk with an emergency fund - what happens if you lose your job at the height (depth?) of a stockmarket crash?  Because you know that emergencies are covered you can take higher risk with your real investment accounts than would otherwise be the case.

jimjames

Deleted_User said:

I would argue you should have six months of salary easily accessible for it to be a proper emergency fund. I think it is a bit dangerous (but perhaps an acceptable risk for you) to say things like "If I lose my job it would be ok because". Emergencies are just that, you don't think it will ever happen but it can. The emergency fund is there for if your household loses its stream of income. In my book.

Six months of salary seems somewhat excessive. It's way more than I have, I think generally it's suggested 3-6 months of expenses not salary is a good place to be for emergency funds but as I put above everyone is different depending on their situation and risk tolerance.

The OP is still suggesting keeping at least £5k in cash alongside £25k investments.

grumiofoundation

chelseablue said:

Hi all, would anyone be able to advise on my emergency fund please? 
I currently have £30,000 in my Marcus account earning 0.50% interest. 
Me and my husband both work full time, if one of us is unemployed we could cover monthly bills on the other persons wage while the other was job hunting. 
Having £30k sat in cash slowly (or quickly!) being erored by inflation earning not much interest might not be the best idea. 
Im thinking of moving most of the money from Marcus and into my S&S ISA, maybe keeping £5k cash and putting £25k in the S&S ISA. 
If I ever did need to buy something more than £5k quickly I have 2 credit cards I could use, or in an absolute disaster could get it from the ISA in around a week 
Does anyone else invest their emergency money?  

Obviously the risk with investing emergency fund is if disaster does strike and you need to access in a week it is not worth 25k...

csgohan4

You can never have too much emergency fund imo. Expenses or salary, is personal preference. There are expenses which are unknown or unexpected like house maintenance or unexpected bill e.t.c

Locking your emergency fund in an investment, is no longer an emergency fund is it? Say you invest 50% of your emergency fund into SMT 1-2 weeks ago, your looking at a loss of around 20%, could you live with that?

Prism

I would always use cash. How much is a personal choice - I have at least 12 months salary in cash set aside

barnstar2077

Personally I have a very small emergency fund and invest the rest, but it fits with my overall strategy, which is quite aggressive (100% equities.)