Where to keep emergency fund

MikeW91

Hi All,

Per the title, I'm after some advice on where to keep my emergency fund. 
I have a little over 12 months expenses sat in my current account (around 15k),
I also have an S&S LISA which is earmarked for the deposit on a house with the buy in around 18 months' time and a few quid in a S&S ISA for other savings goals.

Interest rates on most cash savings accounts still leave a lot to be desired, so wondering if its best to just leave it there or if there are any hidden gems for storing this cash ready for a rainy day?

eskbanker

You could stick it in Premium Bonds, which currently have an expected effective return of circa 0.9%, thereby outperforming easy-access savings accounts.

MikeW91 said:

I also have an S&S LISA which is earmarked for the deposit on a house with the buy in around 18 months' time and a few quid in a S&S ISA for other savings goals.

I didn't pick up on this initially - if you're planning to buy a property in around 18 months time then it would be prudent to shift your LISA from S&S to a cash one instead, as it's entirely plausible that its value could drop significantly over that sort of timeframe....

bostonerimus

Easy access if the most important thing with an emergency account so leave it in the bank.

On-the-coast

Current Account is a good place for an emergency fund.
Personally i recommend that it's not the same current account as your normal day to day spend comes from, as that can lead to it being treated as less of an emergency fund and more of a slush fund.
I keep half my emergency fund in a second current account with my "main bank".
I keep the other half in yet another current account with a bank in a different banking group (in case systems go down for a few days).  I find that i can transfer money almost instantly between these 3 accounts.
In the past I've also used NS&I premium bonds too... but it takes 2-3 days to pull money out of there.

Billycock

savings-accounts-best-interest
Family BS 0.72% but some limitations, see their T&C's

MikeW91

eskbanker said:

it would be prudent to shift your LISA from S&S to a cash one instead, as it's entirely plausible that its value could drop significantly over that sort of timeframe....

Yes, I agree - the plan is to 'cash in' at the end of Feb (im a sucker for doing things to my schedule). So im also looking to see if there are any cash LISAs with a half decent rate ready for the switch.

On-the-coast said:

Current Account is a good place for an emergency fund.
Personally i recommend that it's not the same current account as your normal day to day spend comes from, as that can lead to it being treated as less of an emergency fund and more of a slush fund.
I keep half my emergency fund in a second current account with my "main bank".
I keep the other half in yet another current account with a bank in a different banking group (in case systems go down for a few days).  I find that i can transfer money almost instantly between these 3 accounts.
In the past I've also used NS&I premium bonds too... but it takes 2-3 days to pull money out of there.

I do have two current accounts which i current use Monzo for day-to-day spending and Child and Co. (RBS) for my regular bills (this is the one holding my emergency fund). Have not considered splitting between the two places. RE: delay in pulling it out, that's a good point. Perhaps i could consider keeping 3 months in instant access and the rest in somewhere like a premium bond bonds. Truth be told i know absolutely nothing about them, so will have to do some research!

MX5huggy

Second or is it third vote for Premium Bonds.

People have different definitions of “emergency” taking under a week to access the cash is perfectly acceptable to me. I have overdrafts or credit cards that would be used for true emergencies like buying a plane ticket to see a dying  relative etc. 

eskbanker

MikeW91 said:

eskbanker said:

it would be prudent to shift your LISA from S&S to a cash one instead, as it's entirely plausible that its value could drop significantly over that sort of timeframe....

Yes, I agree - the plan is to 'cash in' at the end of Feb (im a sucker for doing things to my schedule).

As long as you understand that markets obviously have no knowledge of your arbitrary schedule!  There's nothing to say that they'll rise, or even stand still, between now and then, so you could easily lose out by delaying for six weeks, so it is a gamble.

MikeW91 said:
So im also looking to see if there are any cash LISAs with a half decent rate ready for the switch.

In a word, no!

https://www.moneysavingexpert.com/savings/lifetime-isas/#bestbuys

thegreenone

I opened an internet saver account with Tesco bank, about a month ago at 0.61%.  It's now showing 0.76%.  Not huge but has faster payments into my current account with Halifax.

Billycock

thegreenone said:

I opened an internet saver account with Tesco bank, about a month ago at 0.61%.  It's now showing 0.76%.  Not huge but has faster payments into my current account with Halifax.

I understand the increase was a bonus element for loyalty members. Only available if you’re Michael J Fox I believe. 

eskbanker

Billycock said:

thegreenone said:

I opened an internet saver account with Tesco bank, about a month ago at 0.61%.  It's now showing 0.76%.  Not huge but has faster payments into my current account with Halifax.

I understand the increase was a bonus element for loyalty members. Only available if you’re Michael J Fox I believe. 

Sort of - the increase from 0.1% to 0.25% was applied to the non-bonus portion of all Tesco accounts, but the bonus rate currently available is lower than the one included in the above issue, so 0.76% isn't open to new applications (but not for the reason you stated).