Emergency fund and new car fund?

robaber

Hello

I have an emergency fund, of 6 months of bills. 

Any additional disposable income I have goes into my Stocks and Shares ISA and pension.

My car and/ or my wife's car is going to need replacing in the next couple of years. 

Should I wait for my car to need replacing, then use my emergency fund to buy a new car. Then I could build my car fund back up?

Or should I save up for the new car now and hold this money in cash, additional to my emergency fund? Not knowing precisely, when it will be needed. 

M25

What does your wife say?

tacpot12

I start saving for my replacement car when I buy my current car. It's just easier to it this way as I have a standing order setup to pay into a savings account for this, and most of my other car running costs (tax, insurance, maintenance, and breakdown cover). Plus I get the interest on the cost of my next car, rather than having to pay interest. 

CliveOfIndia

I'd start saving now.  You know the car will need replacing in the near future, so that's not an "emergency", it's more a known event.

Your emergency fund is for unforeseen events, such as the boiler packing up or losing your job.  If something like that happens and you have no emergency fund, you're a bit snookered.

Start saving for the car now - and if you're able to earn a bit of interest on the savings, then so much the better.

PRAISETHESUN

Way I see it, you either start putting money into savings now to cover the cost of the car, or you "borrow" from the emergency fund to buy the car and then pay yourself back over time. The risk with borrowing from your emergency fund is that if you have a second emergency at the same time then you'll likely be under increased pressure. Better to start putting money towards it now, especially since it sounds like you're planning for it anyway.

MEM62

tacpot12 said:

I start saving for my replacement car when I buy my current car. It's just easier to it this way as I have a standing order setup to pay into a savings account for this, and most of my other car running costs (tax, insurance, maintenance, and breakdown cover). Plus I get the interest on the cost of my next car, rather than having to pay interest. 

Absolutely this.  Start saving as soon as you get your current car.    

robaber

Thank you all. 

I will take the advice and built up a car fund of £12,000-15,000, for a second hand car.

Ready for when my current car, finally falls apart. 

robaber

M25 said:

What does your wife say?

My wife thinks I should change my car now and use the emergency fund to pay for it.

She would also prefer if we didn't have any investments and all our money was in cash. 

Rich1976

Using your emergency fund to replace the car is a bad idea, unless it was absolutely critical you had to replace the car.
i also don’t see the point of just having an emergency fund and throwing everything else into pensions or Isa’s but then not having any cash spare for big ticket items? Because as you’ve now found, you need to replace the car but have no means of buying one.

so whilst I don’t necessarily agree with your wife that you should only have cash savings and no investments, I think it’s important to budget for an emergency fund and then any short term things which need saving up for in the next 5 years say such as holidays, cars, home improvements etc . Then once you’ve worked out what you need, put any spare left into investments .

its what we do and it’s great peace of mind knowing we can save up to buy something and not have to get into debt to do it .

M25

robaber said:

M25 said:

What does your wife say?

She would also prefer ... all our money was in cash. 

Maybe best to ask on an Internet forum then

I'd say don't touch your emergency money we just don't know what's around the corner (including a new car) so maybe just build a combined backup fund.

It's very uncomfortable not having emergency money (I reckon the vast majority of people have zero) I always like enough for a half decent car (£2000) or a couple of months bills.

Nasqueron

robaber said:

M25 said:

What does your wife say?

My wife thinks I should change my car now and use the emergency fund to pay for it.

She would also prefer if we didn't have any investments and all our money was in cash. 

Losing value every day as inflation eats away, there are likely some good investment guides she could read that explains the benefits of a diversified portfolio