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  • FIRST POST
    • bcfclee27
    • By bcfclee27 12th May 18, 6:44 PM
    • 202Posts
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    bcfclee27
    Emergency Savings Alternative
    • #1
    • 12th May 18, 6:44 PM
    Emergency Savings Alternative 12th May 18 at 6:44 PM
    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.......
Page 1
    • ValiantSon
    • By ValiantSon 12th May 18, 6:52 PM
    • 2,251 Posts
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    ValiantSon
    • #2
    • 12th May 18, 6:52 PM
    • #2
    • 12th May 18, 6:52 PM
    Can you link to the article?

    Personally, I think it sounds like a silly idea.
    • ColdIron
    • By ColdIron 12th May 18, 6:58 PM
    • 4,342 Posts
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    ColdIron
    • #3
    • 12th May 18, 6:58 PM
    • #3
    • 12th May 18, 6:58 PM
    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 cash
    • bcfclee27
    • By bcfclee27 12th May 18, 7:12 PM
    • 202 Posts
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    bcfclee27
    • #4
    • 12th May 18, 7:12 PM
    • #4
    • 12th May 18, 7:12 PM
    Can you link to the article?

    Personally, I think it sounds like a silly idea.
    Originally posted by ValiantSon
    No sorry it was on twitter.


    Thanks I shall keep it where it is then.
    • Peelerfart
    • By Peelerfart 12th May 18, 8:04 PM
    • 1,917 Posts
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    Peelerfart
    • #5
    • 12th May 18, 8:04 PM
    • #5
    • 12th May 18, 8:04 PM
    Is the account the nsi ISA? In which case you can do marginally better.
    Space available for rent
    • Alexland
    • By Alexland 12th May 18, 9:15 PM
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    Alexland
    • #6
    • 12th May 18, 9:15 PM
    • #6
    • 12th May 18, 9:15 PM
    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.

    Alex
    Last edited by Alexland; 12-05-2018 at 9:36 PM.
    • FatherAbraham
    • By FatherAbraham 13th May 18, 11:49 AM
    • 765 Posts
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    FatherAbraham
    • #7
    • 13th May 18, 11:49 AM
    • #7
    • 13th May 18, 11:49 AM
    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.......
    Originally posted by bcfclee27
    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
    • ValiantSon
    • By ValiantSon 13th May 18, 12:09 PM
    • 2,251 Posts
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    ValiantSon
    • #8
    • 13th May 18, 12:09 PM
    • #8
    • 13th May 18, 12:09 PM
    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
    Originally posted by FatherAbraham
    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.
    • FatherAbraham
    • By FatherAbraham 13th May 18, 12:26 PM
    • 765 Posts
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    FatherAbraham
    • #9
    • 13th May 18, 12:26 PM
    • #9
    • 13th May 18, 12:26 PM
    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.
    Originally posted by ValiantSon
    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,
    FA
    • jimjames
    • By jimjames 13th May 18, 12:27 PM
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    jimjames
    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.
    • ValiantSon
    • By ValiantSon 13th May 18, 12:39 PM
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    ValiantSon
    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.
    Originally posted by FatherAbraham
    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.

    Your "solution" falls apart in the case where all banks are shuttered, which happened within recent memory, in both Cyprus, and Greece.
    Originally posted by FatherAbraham
    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.

    You're effectively asserting that there's no need to pay for liquidity insurance. Oh dear. Good luck!
    Originally posted by FatherAbraham
    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.

    Warmest regards,
    FA
    Originally posted by FatherAbraham
    Disingenuous.
    • FatherAbraham
    • By FatherAbraham 13th May 18, 12:56 PM
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    FatherAbraham
    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.
    Originally posted by ValiantSon
    I'm sure that you know very well that in neither Greece nor Cyprus was it hard to buy good in shops during the bank shutterings as long as one had cash to pay for food.

    It's clear that there's a finite chance of all the banks being closed in a financial crisis: it happens occasionally, and apparently unpredictably (otherwise it wouldn't catch so many people out).

    It's clear that there's a rather larger chance of one's favoured bank being unable to meet depositors' demands for withdrawals. We've seen it happen to Northern Rock. To a more limited degree, it's happened when UK banks have suffered IT systems outages.

    It is prudent to insure against these risks by holding some cash.

    Your talking about buying guns implies a much more unlikely state of affairs: that the national state itself breaks down. Confusing that risk with the likelihood of interruptions in the payments and banking system is probably not helpful.

    Warmest regards,
    FA
    • Joe_Bloggs
    • By Joe_Bloggs 13th May 18, 1:11 PM
    • 4,448 Posts
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    Joe_Bloggs
    In a disaster scenario caused by war/ nature/ ideology it may make sense to hold a variety of non cash items that can be traded for goods and services. There is a significant expertise of refugees as to understand what is essential to get around this world.



    It is alleged that toilet rolls are the thing to hold in Venezuela rather than the bolivar currency! Inflation is a currency killer but it does encourage the wheelbarrow manufacturing sector as a cash payment platform.



    You could go all out NRA and demand the right to hold weapons to defend yourself against those who hold weapons that might try to take your life and then your goods and weapons. Some may see this as a circle of despair.



    J_B.
    • ValiantSon
    • By ValiantSon 13th May 18, 1:12 PM
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    ValiantSon
    I'm sure that you know very well that in neither Greece nor Cyprus was it hard to buy good in shops during the bank shutterings as long as one had cash to pay for food.
    Originally posted by FatherAbraham
    There are completely different infrastructures and customs in how retailers operate in Greece compared to the UK. You cannot expect the same to occur here.

    It's clear that there's a finite chance of all the banks being closed in a financial crisis: it happens occasionally, and apparently unpredictably (otherwise it wouldn't catch so many people out).
    Originally posted by FatherAbraham
    An infinitessimally small one, not least as a result of ring-fencing, and as I pointed out, if it were to happen, then having some banknotes and coins would not make up for the ensuing chaos. Having some food in your freezer and cupboards would, however, provide short term protection.

    Furthermore, the chance of all the banks and credit card providers going bust at the same time would have required an unprecedented global financial meltdown. It is more likely, although still extremely unlikely, that some of these banks in your near-apocalyptic scenario, would have perfectly sound balance sheets, but be suffering from a liquidity issue, and this is where the Bank of England steps in with liquidity insurance.

    It's clear that there's a rather larger chance of one's favoured bank being unable to meet depositors' demands for withdrawals. We've seen it happen to Northern Rock.
    Originally posted by FatherAbraham
    I did say that having more than one account, each with a different bank, or using credit cards from different providers was insurance against this. You've also ignored the fact that banking regulations have changed since the run on Northern Rock. Ring-fencing has stopped banks from using assets in their retail banking for investment banking. The risk of a similar issue to Northern Rock occurring again has, therefore, been significantly reduced.

    To a more limited degree, it's happened when UK banks have suffered IT systems outages.[
    Originally posted by FatherAbraham
    This is not even vaguely the same as a bank collapsing. Those banks are still trading and access to funds is still available through branches and ATMs, and normally via telephone banking too.

    It is prudent to insure against these risks by holding some cash.
    Originally posted by FatherAbraham
    Hey, if you want to do that then so be it, but it isn't really necessary.

    Your talking about buying guns implies a much more unlikely state of affairs: that the national state itself breaks down. Confusing that risk with the likelihood of interruptions in the payments and banking system is probably not helpful.
    Originally posted by FatherAbraham
    I was making the point that you are on the verge of adopting a survivalist mindset.

    If you think that the complete collapse of the banking system would not result in serious outbreaks of lawlessness and disorder then you are in for a shock should it ever happen.

    Warmest regards,
    FA
    Originally posted by FatherAbraham
    Still disingenuous.
    • RG2015
    • By RG2015 13th May 18, 1:55 PM
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    RG2015
    FatherAbraham always uses this in their signature so it is not directed to anyone in particular.

    Some people may infer more into it but I see it as merely being polite.
    • ValiantSon
    • By ValiantSon 13th May 18, 1:59 PM
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    ValiantSon
    FatherAbraham always uses this in their signature so it is not directed to anyone in particular.

    Some people may infer more into it but I see it as merely being polite.
    Originally posted by RG2015
    That would be fine if they hadn't been condescending and trying to score points in the same post.
    • kidmugsy
    • By kidmugsy 13th May 18, 7:38 PM
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    kidmugsy
    Not only cash: we insure against supply chain disruption by keeping a stock of food, bottled water, aluminium cooking foil, bin liners, and bog rolls. We keep a stock of wine automatically by shopping when it's "25% off for six bottles".

    Maybe we ought to store some propane and diesel too but we approximate to the latter by always keeping the tank on our car pretty full. We have decided not to buy a little electrical generator.
    Last edited by kidmugsy; 13-05-2018 at 7:45 PM.
    Free the dunston one next time too.
    • Alexland
    • By Alexland 13th May 18, 8:04 PM
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    Alexland
    I store petrol and keep it fresh by adding fuel stabiliser. Those zombies won't stand a chance against my self propelling lawnmower. I also have a sharp axe which might cut through soggy bone...
    • ColdIron
    • By ColdIron 13th May 18, 8:18 PM
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    ColdIron
    Why dull your axe when everybody knows that a billiard ball cue or a selection of old vinyl works just as well, and if that fails just go upstairs
    • Peelerfart
    • By Peelerfart 13th May 18, 8:53 PM
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    Peelerfart
    Yippee! I just found out I'm safe. I have OCD about running out of toilet rolls.

    Now bring on the Venezuelan zombies.

    I'm ready.
    Space available for rent
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