Emergency Savings Alternative
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bcfclee27
Posts: 228 Forumite
Was reading a Vanguard article today which advised putting your emergency savings into a low risk investment like a money market fund so the money is easy to access and you don't have to worry about the value of savings changing over time......
I currently hold mine (approximately 12k) with NS&I at around 1% interest.
Im wondering if the above or something similar is an alternative.
Don't want the hassle of spreading it all over the shop in savings accounts would rather it was all in one place.
Even something like VLS20 which should be fairly low risk ????
Thoughts.......
I currently hold mine (approximately 12k) with NS&I at around 1% interest.
Im wondering if the above or something similar is an alternative.
Don't want the hassle of spreading it all over the shop in savings accounts would rather it was all in one place.
Even something like VLS20 which should be fairly low risk ????
Thoughts.......
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Comments
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Can you link to the article?
Personally, I think it sounds like a silly idea.0 -
Money market funds have poor returns, think < 0.5% and have ongoing charges. Plus you'll pay a transaction charge or an annual charge. You could well lose money. Leave your money as cash0
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ValiantSon wrote: »Can you link to the article?
Personally, I think it sounds like a silly idea.
No sorry it was on twitter.
Thanks I shall keep it where it is then.0 -
Is the account the nsi ISA? In which case you can do marginally better.Space available for rent0
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It was probably this article aimed at a US audience:
https://investor.vanguard.com/emergency-fund/where-to-put-emergency-fund
VLS20 is not a money market fund for several reasons primarily as it does not mostly invest in short term debt securities.
I cycle our emergency money around 5% regular savers and usually have a balance of a few thousand in our 123 account. However in my life I have never had an emergency that required unexpected cash so it does feel a bit of a waste of time. If my cash return was lower I would consider investing it into something like VLS60 and just suffering a potential loss and delay in the unlikely event I ever needed access.
Alex0 -
Was reading a Vanguard article today which advised putting your emergency savings into a low risk investment like a money market fund so the money is easy to access and you don't have to worry about the value of savings changing over time......
I currently hold mine (approximately 12k) with NS&I at around 1% interest.
Im wondering if the above or something similar is an alternative.
Don't want the hassle of spreading it all over the shop in savings accounts would rather it was all in one place.
Even something like VLS20 which should be fairly low risk ????
Thoughts.......
The first tranche of emergency savings, one holds in cash. Not cash deposits at a financial institution, but cash, banknotes, the stuff one can buy food and fuel with. Then, when there's a run on one's bank, like at Northern Rock, one doesn't need to take time off work to queue with the panicked pensioners -- one knows that one has enough liquidity to get through the period until the state's guarantee scheme refunds one the lost deposit.
That tranche of your savings costs you inflation each year, which is the insurance premium you pay for being liquid (plus the cost of the moneybox or safe you keep it in).
The next tranche one keeps in the best interest-bearing account at a guaranteed financial institution one can find.
Finally one gets to a level where one can !!!! around with money-market accounts or whatever, but putting returns before liquidity on one's emergency funds is extremely stupid.
Warmest regards,
FAThus the old Gentleman ended his Harangue. The People heard it, and approved the Doctrine, and immediately practised the Contrary, just as if it had been a common Sermon; for the Vendue opened ...THE WAY TO WEALTH, Benjamin Franklin, 1758 AD0 -
FatherAbraham wrote: »The first tranche of emergency savings, one holds in cash. Not cash deposits at a financial institution, but cash, banknotes, the stuff one can buy food and fuel with. Then, when there's a run on one's bank, like at Northern Rock, one doesn't need to take time off work to queue with the panicked pensioners -- one knows that one has enough liquidity to get through the period until the state's guarantee scheme refunds one the lost deposit.
That tranche of your savings costs you inflation each year, which is the insurance premium you pay for being liquid (plus the cost of the moneybox or safe you keep it in).
The next tranche one keeps in the best interest-bearing account at a guaranteed financial institution one can find.
Finally one gets to a level where one can !!!! around with money-market accounts or whatever, but putting returns before liquidity on one's emergency funds is extremely stupid.
Warmest regards,
FA
There is not much need to hold more than a very little amount of specie, if indeed any at all. Having a second account with a different bank mitigates against any short term lack of access to funds at one particular bank. Having a credit card also handles this. There is no need to expose your finances to the ravages of inflation without any interest helping to ameliorate that loss.0 -
ValiantSon wrote: »There is not much need to hold more than a very little amount of specie, if indeed any at all. Having a second account with a different bank mitigates against any short term lack of access to funds at one particular bank. Having a credit card also handles this. There is no need to expose your finances to the ravages of inflation without any interest helping to ameliorate that loss.
I love it when people start using obscure terms like "specie" (in the context of cash, it generally means gold coins (with "inherent" worth), rather than simply "fiat" banknotes) to complify and confuse.
Your "solution" falls apart in the case where all banks are shuttered, which happened within recent memory, in both Cyprus, and Greece.
You're effectively asserting that there's no need to pay for liquidity insurance. Oh dear. Good luck!
Warmest regards,
FAThus the old Gentleman ended his Harangue. The People heard it, and approved the Doctrine, and immediately practised the Contrary, just as if it had been a common Sermon; for the Vendue opened ...THE WAY TO WEALTH, Benjamin Franklin, 1758 AD0 -
Yes, I think that makes sense to have a sufficient supply of essentials - bad weather or whatever - it means you haven't got to panic about having insufficient food etc.Remember the saying: if it looks too good to be true it almost certainly is.0
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FatherAbraham wrote: »I love it when people start using obscure terms like "specie" (in the context of cash, it generally means gold coins (with "inherent" worth), rather than simply "fiat" banknotes) to complify and confuse.
No, I used it because it is the correct term and did so to make a clear distinction between that and funds held in a bank account, which are also cash. Specie refers to all coins and notes, and not, as you suggest, to gold coins. While it was once more commonly used to differentiate between coins and notes (not just gold coins), that distinction has become less common as alternative forms of payment have been developed, e.g. debit and credit cards.FatherAbraham wrote: »Your "solution" falls apart in the case where all banks are shuttered, which happened within recent memory, in both Cyprus, and Greece.
Are you for real? You honestly believe that there is any real chance of all the banks being closed? If that were to happen then you would find it very hard to buy anything as all of the shops would be relying on the banks to be operating too.
You may also like to buy yourself an assault rifle and start stockpiling food and fuel in your cabin in the woods.FatherAbraham wrote: »You're effectively asserting that there's no need to pay for liquidity insurance. Oh dear. Good luck!
No, you don't seem to know what you're talking about. Liquidity insurance is relevant at the level of the central bank being a lender of last resort for the retail banks. You may be trying to scale it down to the level of the individual, but that is ludicrous. Other financial institutions act as liquidity insurance for the individual.FatherAbraham wrote: »Warmest regards,
FA
Disingenuous.0
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