Emergency Fund Poll - How prepared are you for an emergency?

DigForVictory wrote: »

I've a small amount stashed that I routinely dent for the lads birthdays & Christmas but I keep rebuilding it.
Thinking of a car or boiler, I need to try harder.
<heads off the challenge thread>

For Christmas, I did surveys, lots and lots of surveys which pretty much covered all the presents. I'm building up the voucher pot for birthdays as we speak.

For all other savings, I stalk the debt free and mortgage free wannabee threads, it's amazing the money saving/making tips they come up with!

I keep reading this as "emergency fun", like we should all have a stash of jokes and party hats for unexpected fun times.

Our emergency fund has been pretty much wiped out by both cars breaking down simultaneously. I know that’s what it was there for but having £300 left scares me. I’d be able to pay for a washing machine or boiler repair, but f it needed replacing it’d have to be credit cards, which are thankfully blank and genuine emergency cards. We’re also buying and selling a house, so our actual savings are almost gone too. We had savings, an emergency fund and a holiday fund and all three are looking very low right now. That’s life I suppose.

Emergency fund size depends on a number of factor.

Budget
A proper budget will have most thing in it already with contingency for things that will need replacing or are a bit unpredictable.
The emergency is when it happen a bit earlier than predicted so needs a top up.
eg if you think a washing machine should last 10 years by year 5 you should have 1/2 set aside already, if very organized you migh weight the replacement to the latter years rather than spread evenly.

£1k extra put aside is quite generous if you are planning properly on lifecycle of things.

Also other events need planning like if you have elderly relatives save some money to attend the funerals, especially if they live a long way away and it might need hotel or flights.

An emergency should only happen once as it should be in the budget after the first time.

Free cashflow
If you are saving each month, you can just stop saving to cover the things not in the budget and top up the fund if it drops to low.

recovery time
how long to restore the fund, if it was wipes out how long to recover, if more than 6 months I think it needs to be a bit bigger to start and only stop adding when it recoverable in 6 months.


The above is about dealing with money out incidences.

The other much more important incident to think about and fund is loss of income, I call this the

disaster fund.
This needs to be enough to cover costs for a period till you restore income.

Size will depend on factors like number of earners, benefits available, job market.

the longer you think it will take to get a job the more funds you need to cover expenses.

The next fund which is an extension of the disaster fund and is the ultimate disaster fund as you can reduce income long term.

A well balanced retirement fund with some in reasonably accessible places like S&S ISA, term saving premium bonds etc. can be a source for the disaster fund as you only need access a bit at a time to cover costs and can take the hit on some loss of income if there are penaties on withdrawing.

I only have about £200 in savings ): thankfully I am in a rented house so I wouldn't have to pay for a boiler, but I do struggle with saving.