Emergency fund - real world examples

subjecttocontract

What is an emergency fund for, specifically .....got any examples ?
I don't have an account that I call an emergency fund.
I can't envisage a situation where I would need a very large sum of money, quickly, over and above the limits on my credit/debit cards.

Bostonerimus1

subjecttocontract said:

What is an emergency fund for, specifically .....got any examples ?
I don't have an account that I call an emergency fund.
I can't envisage a situation where I would need a very large sum of money, quickly, over and above the limits on my credit/debit cards.

I don't differentiate my emergency fund from my bank accounts or Money Market fund specifically, but I'm always careful to keep my accounts above the level of 6 months spending so I have money for emergencies like replacing a boiler, fixing the roof or major car repairs. It's also good to have money available incase you lose a job or need to move. Relying on credit cards etc is one way to potentially built up costs in interest charges so I would avoid it - an emergency fund should be cash, not borrowing or debt.

jimjames

Emergency fund spread across a few regular savers paying 5.5% and 6.25% plus the remainder in Tandem at 5%.

Since BoS now send a text message to warn when going overdrawn I keep balance of near to zero in current account and pay in from Tandem as needed to cover DD. When rates were 1% or below it wasn't worth the bother but at 5% plus I might as well maximise the interest as far as possible.

subjecttocontract said:

What is an emergency fund for, specifically .....got any examples ?
I don't have an account that I call an emergency fund.
I can't envisage a situation where I would need a very large sum of money, quickly, over and above the limits on my credit/debit cards.

Boiler breakdown and replacement needed, plumber doesn't take credit cards. Car fails and needs replacement, garage or private seller don't take cards. Depending on your situation you might need more or less. When the boiler failed on 2 BTL properties in the same year that emergency fund got some beating.

subjecttocontract

* I wouldn't consider moving house an emergency.....surely that is something you would pre plan ?
* I can understand why you might need to have 6 months spending set aside but I don't see why that wouldn't just be part of your other savings accounts.
* I can see an unexpected car repair bill would need funds available but personally I'd use a credit/debit card (and pay it off at the end of the month.)
* Its extremely unlikely that my roof would need repairs on an emergency basis......I have buildings insurance for damage, anything else isn't likely to suddenly present a problem.

Seems to me that an emergency fund means entirely different things to different people and that what we are really talking about is money that is available/ easy to access. I would imagine everyone who has cash savings would have some part of it that met that requirement.

Prism

subjecttocontract said:

What is an emergency fund for, specifically .....got any examples ?
I don't have an account that I call an emergency fund.
I can't envisage a situation where I would need a very large sum of money, quickly, over and above the limits on my credit/debit cards.

I used my emergency fund during the covid lockdown to keep me going for a year as I had almost zero income. I was thankful to have around 18 months of spending available.

friolento

I suppose if you are one of two working heads of a young family with two toddlers, two student loans, a mortgage and two cars on hire purchase, your idea of an emergency fund is slightly different to that of two retired people each with DB and state pensions, without a mortgage, two paid off cars sitting in the double  garage, a twice-weekly cleaning lady, your own boat moored in the local sailing club and a 4 berth luxury camper van sitting on your forecourt.

elsien

subjecttocontract said:

What is an emergency fund for, specifically .....got any examples ?
I don't have an account that I call an emergency fund.
I can't envisage a situation where I would need a very large sum of money, quickly, over and above the limits on my credit/debit cards.

From perusing, the debt free wannabe board on here, the concept of an emergency fund starts with people who are completely shot for credit struggling with staying afloat. They can’t get more credit due to existing debt levels.

So when people put their budgets together, the emergency fund is for the unplanned things -the boiler/washing machine breaking down/someone being ill and higher costs-and is a way of getting  getting people to think about how to move forward without having to rely on credit any more. Basically when however, carefully you’ve budgeted for everything you can think of, life throws you a curveball. 

root

elsien said:

subjecttocontract said:

What is an emergency fund for, specifically .....got any examples ?
I don't have an account that I call an emergency fund.
I can't envisage a situation where I would need a very large sum of money, quickly, over and above the limits on my credit/debit cards.

From perusing, the debt free wannabe board on here, the concept of an emergency fund starts with people who are completely shot for credit struggling with staying afloat. They can’t get more credit due to existing debt levels.

So when people put their budgets together, the emergency fund is for the unplanned things -the boiler/washing machine breaking down/someone being ill and higher costs-and is a way of getting  getting people to think about how to move forward without having to rely on credit any more. Basically when however, carefully you’ve budgeted for everything you can think of, life throws you a curveball. 

None of those things are emergencies though. They are all things that you know will cost you to either repair or replace at some point. When you buy a washing machine, you need to start plugging a way for the next one. You have sinking funds.

A lot of people confuse 'emergency fund' with 'income replacement'.

If you do this then what happens when you have multiple emergencies at the same time and/or lose your income too?

Typically you need income replacement and sinking funds in your budget.

Bostonerimus1

elsien said:

subjecttocontract said:

What is an emergency fund for, specifically .....got any examples ?
I don't have an account that I call an emergency fund.
I can't envisage a situation where I would need a very large sum of money, quickly, over and above the limits on my credit/debit cards.

From perusing, the debt free wannabe board on here, the concept of an emergency fund starts with people who are completely shot for credit struggling with staying afloat. They can’t get more credit due to existing debt levels.

So when people put their budgets together, the emergency fund is for the unplanned things -the boiler/washing machine breaking down/someone being ill and higher costs-and is a way of getting  getting people to think about how to move forward without having to rely on credit any more. Basically when however, carefully you’ve budgeted for everything you can think of, life throws you a curveball. 

I come from a time when using credit was still seen as a bad thing. I've carried my Mum's hatred of "hire purchase" into adult life and so have always had a cash emergency fund. If it's convenient to pay for something with a credit card I will, but I have enough cash in the bank to pay it off immediately and avoid any interest. At least 6 months of cash in the bank is also good to provide spending money if you lose a job. The only debt I think someone should ever have is a mortgage and maybe a car payment.

boingy

I don't really call it an emergency fund but my "front line" defences are that I try to make sure my main current account has about half a month's worth of money at its lowest point and the attached savings account has about two month's money. Neither of these are at great rates: the current account pays 2% interest but only on the first £1000 and the savings account pays 3.5% but, for me, that's acceptable. 

I make the rest of my cash and investments work much harder, with a mix of easy access, fixed rates, cash ISAs and S&S ISAs. Some of that stuff is accessible within a day or two, some is tied up for a year or more. But I've always got several month's worth of money available pretty much instantly (unless the internet goes down!)