Looking for some about stashing my "lost job" funds

zester

So I have saved the recommended three months' salary in case I end up without a job - it's a total of £8000.  I'm just looking for advice on where to save it - I am assuming a regular savings account, but I am concerned that inflation will eat away at that £8000.  I don't see that I can invest it as I can't risk losing the capital if it all goes wrong; I assume I should keep saving a bit more in my emergency fund to match the cost of inflation?

I would have considered a notice account, but the highest I can find is 1.15% on a 120-day notice, whereas I can get 0.90% on instant access at Atom or chance my arm at Premium Bonds and hope to get the average 1% indicated on the calculator?

What do you guys do with your emergency fund? 

Alexland

zester said:

What do you guys do with your emergency fund?

I accept it will need to be topped up to keep up with inflation but at least it's a small proportion of our overall wealth which includes higher risk investment accounts which are likely to return more over the long term. Overall we expect to beat inflation across the whole asset allocation so I sleep well knowing that overall our money is in the right places and will be growing.

Better to keep emergency money instant access so for your £8k have you considered a Virgin Money M Plus current account paying 2% on the first £1k then 1% on the next £7k via the linked savings account? You might also want to consider splitting the money across unrelated financial institutions incase you have issues accessing when you need it.

400ixl

What is your notice period and what risk do you feel there is your current role?

If you have 3 months notice from your employer for example you could go with a 90 day notice account. If the risk is fairly low you could perhaps go with the 120 days and provided it does allow withdrawal (with penalty likely) shorter than that if required just lose that interest if it comes to it..

How much of your salary do you actually spend each month, as in reality you may well have more than 3 months of outgoings in that account. That may give you the opportunity to split the money, maybe some into an easy access account and some into a longer term access account, so your notice period and short term money ties you through to the longer term access.

I wouldn't be investing the money if that is your entire investment portfolio as the risk is too high that you may lose out in the short term when you need access to it.

Albermarle

You are ( like all of us) caught between the need for safety and easy access for our emergency money and inflation eating it away, and there is no easy answer. Like Alexland said you just need to make sure you have other money invested long term ( like in a pension) to counteract the issue.

 or chance my arm at Premium Bonds and hope to get the average 1% indicated on the calculator?

Premium Bonds are not a bad choice but with only £8000, you are likely not to get an average return unless you hold them for a few years . It could be more or less than 1% depending on your luck.
In theory you can win big but the odds are massively stacked against this happening . Even winning a £50 or £100 prize ( as opposed to the usual £25 )is a pretty rare event.

george4064

I’ve got my emergency fund in an instant access savings account, that’s what an emergency fund is for. Any interest earnt should be considered a bonus and not a necessity, as the aim for emergency fund is pretty clear.

Also, an emergency fund isn’t a ‘lost job’ fund. It should be for emergencies that cover a wide range of situations which include losing your job, but also things like boiler going kapoot, car problems, major emergency repairs to your home and many more…

pjread

Premium bonds personally, though I'm wondering whether to cut it down as inflation rears it's head more visibly.  

I wouldn't personally earmark it for car/boiler/house repairs etc though - general maintenance/lifecycle of 'stuff you own' should be covered from income and budgeted for really, and you should treat this as 'untouchable' except in true emergencies rather than something you can dip in to for the "emergency of the month" to avoid any horror scenarios (e.g. actual loss of job and realising it's dwindled)

renegade1

I have one month's emergency savings in an instant access savings account at 0.6% and at least three month's "+ 25% buffer" invested in vanguard's FTSE global all cap. The +25% buffer is the amount to safeguard against stock market crashes. So if stocks are down by 25% then I will still have my three months'.

pjread

renegade1 said:

I have one month's emergency savings in an instant access savings account at 0.6% and at least three month's "+ 25% buffer" invested in vanguard's FTSE global all cap. The +25% buffer is the amount to safeguard against stock market crashes. So if stocks are down by 25% then I will still have my three months'.

This works, and given the tiny (and definitely sub-inflation)  returns on cash I may be moving some over from premium bonds to equities - but it'd still sting to be a forced seller during a real crash; and if this is truly a 'lost job fund' for the OP then worth being conscious of the chance of job losses & markets tanking being correlated... 

phillw

renegade1 said:

I have one month's emergency savings in an instant access savings account at 0.6%

You can get 2% on £1000 and 1% on £25000 if you open a virgin current account. So unless you have those maxed out, then you shouldn't have anything in 0.6%

Ocelot

pjread said:

Premium bonds personally, though I'm wondering whether to cut it down as inflation rears it's head more visibly.  

I wouldn't personally earmark it for car/boiler/house repairs etc though - general maintenance/lifecycle of 'stuff you own' should be covered from income and budgeted for really, and you should treat this as 'untouchable' except in true emergencies rather than something you can dip in to for the "emergency of the month" to avoid any horror scenarios (e.g. actual loss of job and realising it's dwindled)

Personally I transfer £250 a month to another current account via standing order, and use that account as a routine but unexpected expenses account. I also have another account linked to my current account with more substantial emergency money in it, for if the routine money doesn't cut it. On my main spreadsheet these aren't counted in the total, as they are considered spent.

Neither gets any interest, other than token.

DireEmblem

There are lots of similar discussions on this - I would split it across say 3 different institutions.  This would just be in case you do need access to the funds, that if one institution was either 'slow' in paying, or had a systems outage, you could use another.