Emergency cash fund musings

Sapindus

GazzaBloom said:

diligently paying it off every month so a £10K credit limit could hopefully be granted in time and then using the credit card credit limit as the emergency fund

This supposes that your credit limit stays the same which isn't a given, recalling recent decisions by Barclays to slash numerous customers' limits without any warning.

trust.no.1

Rich1976 said:

The idea of an emergency fund is that it is there in an emergency. Investments are for the long term and need to be kept separate to an emergency fund.

     

Yeah - in addition to various savings accounts and ISAs, I maintain a cash emergency fund for use in the direst of emergencies. I use one of those Lusen stainless steel piggy banks which you have to destroy to remove the contents. I am reluctant to keep all my money in financial institutions.  I've been adding to this fund for several years and it now signficantly larger than the OP's figure. Yeah I guess a thief could break in and steal the lot, but it is a risk I'm willing to take. All I need in an emergency is a good hacksaw

Albermarle

trust.no.1 said:

Rich1976 said:

The idea of an emergency fund is that it is there in an emergency. Investments are for the long term and need to be kept separate to an emergency fund.

     

Yeah - in addition to various savings accounts and ISAs, I maintain a cash emergency fund for use in the direst of emergencies. I use one of those Lusen stainless steel piggy banks which you have to destroy to remove the contents. I am reluctant to keep all my money in financial institutions.  I've been adding to this fund for several years and it now signficantly larger than the OP's figure. Yeah I guess a thief could break in and steal the lot, but it is a risk I'm willing to take. All I need in an emergency is a good hacksaw

The problem with this is that if big financial institutions were to collapse ( which I presume is what you are worried about) the the money in the piggy bank would lose a lot of its value anyway.

GazzaBloom

You can transfer money directly from the Virgin cash ISA and a current account held elsewhere in a matter of seconds so I don't see how keeping the money in Co-op is much more convenient than keeping the money in Virgin.

Personally I don't see what you've got against chasing the highest interest rates. The highest paying easy access cash ISA I can find with Co-op is the online cash ISA at 1.53%. If you've got £10k sat in it for a year you are losing out on £147 of extra interest compared to moving it to Virgin at 3%. £147 is not to be sneezed at IMHO. You don't have to be constantly moving your money about every few days, but surely checking if there are any higher paying accounts once every now and again and moving your money to them won't do you any harm.

The reason that chasing the best interest rates is a common theme on this forum is because it's an easy way of earning a bit of extra money for doing very little. Why leave money sat in an easy access savings account at 1.5% when it can be sat in a different easy access account at 3%? 

The Virgin 3% ISA offer is only available to holders of eligible Virgin current accounts, I had a quick look and it's not clear that their Joint Current Account qualifies, so that's no good to me. Plus the term of ISA offer are that it can be withdrawn at any time and  Virgin can switch you to a different Cash ISA. These offers are marketing ploys to get people to switch their current account to Virgin.

Plus, there is a little more effort than a "matter of seconds" as well isn't there? Redirect employers salary payments, my pension payment, set up new debit cards whenever the details are held such as Apple Pay, set up payees details fro ad hoc payments to family etc. within the new current account. Plan the timing of the switch with regards outgoing/incoming payments.

That's not worth £147 year to me, £500-600 a year may be tempting. But this is not the point of the debate here.

GazzaBloom

Sapindus said:

GazzaBloom said:

diligently paying it off every month so a £10K credit limit could hopefully be granted in time and then using the credit card credit limit as the emergency fund

This supposes that your credit limit stays the same which isn't a given, recalling recent decisions by Barclays to slash numerous customers' limits without any warning.

At last, a post engaging in the hypothesis. A very good point against using a CC in place of cash as emergency funding.

Nebulous2

trust.no.1 said:

Rich1976 said:

The idea of an emergency fund is that it is there in an emergency. Investments are for the long term and need to be kept separate to an emergency fund.

     

Yeah - in addition to various savings accounts and ISAs, I maintain a cash emergency fund for use in the direst of emergencies. I use one of those Lusen stainless steel piggy banks which you have to destroy to remove the contents. I am reluctant to keep all my money in financial institutions.  I've been adding to this fund for several years and it now signficantly larger than the OP's figure. Yeah I guess a thief could break in and steal the lot, but it is a risk I'm willing to take. All I need in an emergency is a good hacksaw

Wow - I'd never heard of one of them, until now. The capacity to make and sell unusual products still has the ability to catch me out. You have more than £10k in one of those? 

I've around £1k in cash. We moved home and sold off some stuff we didn't need mostly in cash. We had plans to spend a lot of money on the new home and earmarked the money to spend on that. 

Tradesmen here are much in demand and the only time we tried to use any of the cash a roofer was slightly disdainful and said he'd prefer a bank transfer. 

Our plans to work on our house have sort of run aground for several reasons. We've become comfortable with how it is. When it is functional and works, we're struggling to see why we should upgrade, for  little benefit other than a more modern look.

We're aware how much money it is possible to sink in an old house without any possibility of getting it back. 

While I'm ok with the £1k sitting at home meantime, I'm mindful of the impact inflation will be having on it now. 

jimjames

GazzaBloom said:

Sapindus said:

GazzaBloom said:

diligently paying it off every month so a £10K credit limit could hopefully be granted in time and then using the credit card credit limit as the emergency fund

This supposes that your credit limit stays the same which isn't a given, recalling recent decisions by Barclays to slash numerous customers' limits without any warning.

At last, a post engaging in the hypothesis. A very good point against using a CC in place of cash as emergency funding.

Maybe you missed my post earlier when I said I'd done what you propose. Having at least some cash savings even not what you would class an emergency fund is still worthwhile as I still need some cash to shift around to cover bills etc. As I said previously if you spend all you earn then it's not a viable strategy but if you have spare money at the end of the month then it's an option even if high risk. Worst case scenario you can draw from investments if absolutely necessary.

trust.no.1

Albermarle said:

trust.no.1 said:

Rich1976 said:

The idea of an emergency fund is that it is there in an emergency. Investments are for the long term and need to be kept separate to an emergency fund.

     

Yeah - in addition to various savings accounts and ISAs, I maintain a cash emergency fund for use in the direst of emergencies. I use one of those Lusen stainless steel piggy banks which you have to destroy to remove the contents. I am reluctant to keep all my money in financial institutions.  I've been adding to this fund for several years and it now signficantly larger than the OP's figure. Yeah I guess a thief could break in and steal the lot, but it is a risk I'm willing to take. All I need in an emergency is a good hacksaw

The problem with this is that if big financial institutions were to collapse ( which I presume is what you are worried about) the the money in the piggy bank would lose a lot of its value anyway.

I started holding a cash position (literally ) after been spooked by stories on MSE and elsewhere of people going through the nightmare of having their bank accounts frozen and going through hoops to regain access. I prefer to have my "dire emergency" fund in cash despite the drawbacks such as possible theft and lack of interest. I don't consider myself a conspiracy theorist - but I prefer to diversify my holdings and not have absolutely everything held in financial institutions. I realise though that I will have to go through a replacement exercise in a few years once the notes with the Queen's head are taken out of circulation.

Eco_Miser

GazzaBloom said:

You can transfer money directly from the Virgin cash ISA and a current account held elsewhere in a matter of seconds so I don't see how keeping the money in Co-op is much more convenient than keeping the money in Virgin.

Personally I don't see what you've got against chasing the highest interest rates. The highest paying easy access cash ISA I can find with Co-op is the online cash ISA at 1.53%. If you've got £10k sat in it for a year you are losing out on £147 of extra interest compared to moving it to Virgin at 3%. £147 is not to be sneezed at IMHO. You don't have to be constantly moving your money about every few days, but surely checking if there are any higher paying accounts once every now and again and moving your money to them won't do you any harm.

The reason that chasing the best interest rates is a common theme on this forum is because it's an easy way of earning a bit of extra money for doing very little. Why leave money sat in an easy access savings account at 1.5% when it can be sat in a different easy access account at 3%? 

The Virgin 3% ISA offer is only available to holders of eligible Virgin current accounts, I had a quick look and it's not clear that their Joint Current Account qualifies, so that's no good to me. Plus the term of ISA offer are that it can be withdrawn at any time and  Virgin can switch you to a different Cash ISA. These offers are marketing ploys to get people to switch their current account to Virgin.

Plus, there is a little more effort than a "matter of seconds" as well isn't there? Redirect employers salary payments, my pension payment, set up new debit cards whenever the details are held such as Apple Pay, set up payees details fro ad hoc payments to family etc. within the new current account. Plan the timing of the switch with regards outgoing/incoming payments.

That's not worth £147 year to me, £500-600 a year may be tempting. But this is not the point of the debate here.

1. You don't need to switch, you can just open a current account - if you've already got a Virgin current account, try opening the ISA, if you succeed it's an eligible account.
2. The ISA is also being marketed to existing current account holders - no chance of a switch from them.
3. Opening offers normally can be withdrawn any time - it doesn't mean that the people who took the offer lose it, just that the offer isn't available to new applicants.