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Stooze pot as emergency fund
Finance advice typically suggests 3-6 months of emergency fund. I see 2 (often conflated) reasons for this:
- Having money beyond day to day spending so that if an unexpected expense arises, you can cover it
- Having access to money rapidly to use in emergency when needed
I am slow stoozing at the moment and so I don't see the need for an emergency fund to cover the 2 above situations.
On the first point, I have savings higher than my day to day spending needs. They are in fixed rate bonds that are due to mature as the interest free period of my stoozing cards end (and other illiquid things, for the sake of arguement here).
On the second point, I have available credit limit of several months' expenses on my stoozing cards (and enough interest free time for the next few months). Enough credit limit to bridge the time to liquidate my illiquid assets.
So I don't need an emergency fund. Am I missing something or do you also do this?
Comments
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An emergency fund is there for if you lose your job, have a medical emergency abroad, a sudden big expense like the boiler going bang.
If your savings cover your stoozing pot but you have no leeway due to them being fixed bonds, what would you do if you were in a car accident tomorrow, couldn't work and got no pay? Or the family dog needed emergency surgery not covered on insurance?
If you can cover a loss of income or sudden high expense then that is fine, if you would start paying interest because you couldn't clear the card, then a fund is a good idea.
Sam Vimes' Boots Theory of Socioeconomic Unfairness:
People are rich because they spend less money. A poor man buys $10 boots that last a season or two before he's walking in wet shoes and has to buy another pair. A rich man buys $50 boots that are made better and give him 10 years of dry feet. The poor man has spent $100 over those 10 years and still has wet feet.
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I think you are mixing the 2 purposes of an emergency fund.
That I may need a large amount of money without being able to plan for it is an arguement for having savings (or technically a positive net worth). An emergency fund achieves this. But there are better (potentially illiquid) options, such as the bonds I have, which probably give higher interest.
That I may need money quickly without being able to plan for it is also addressed by an emergency fund. But it can also be addressed by having credit (and time) limits remaining on slow stoozing credit cards, which I also have.
Clearing a stooze pot shouldn't have much to do with emergency funds because it is a planned large expense (a good stoozer knows the amount and when to pay by).
Taken together, this suggests that I don't need an emergency fund because I have the purpose of an emergency fund covered by my stoozing?
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I would say there are differences between emergency funds & emergency "cash", you have the funds so that's not need, and you have a plan to access emergency "cash".
Let's Be Careful Out There0 -
Fixed bonds and having to mix stoozing and credit card spending to cover emergencies is a gamble to not have cash in accessible funds. I have around 4 months salary in Santander Edge savers and another 4 in the NatWest/RBS regular savers, good interest but in an emergency I can cover bills without having to touch the S&S ISA
Sam Vimes' Boots Theory of Socioeconomic Unfairness:
People are rich because they spend less money. A poor man buys $10 boots that last a season or two before he's walking in wet shoes and has to buy another pair. A rich man buys $50 boots that are made better and give him 10 years of dry feet. The poor man has spent $100 over those 10 years and still has wet feet.
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