Main savings- how much do you really need?
Discussion
A bit long-winded but bear with me, somewhat car related...
Obviously this varies massively from person to person but I am curious as to how much is 'enough', more so if you're not actually saving towards anything in particular.
I've had just shy of £10k in savings for a while now, just sitting there in an ISA. It's gone down to that in the past couple of years from a few grand higher, mainly because of loss of shift money meaning having to dip into savings to run a 745i/Boxster and also selling both of these for a fair loss in a short space of time after buying.
Now my salary has had a big increase in the last 6 months so I'm much more comfortable. The thing is, I don't have a purpose for this 10 grand as such, I've just always had in my head to have a nice 5 figure sum sitting in the bank as a rainy day fund. Interest of ~£140 over the past year has just been added so it's not like it's gaining anything of note..
Because, as we all know, the correct number of cars to have is X+1, I can't shake the idea of getting a third car (sports car of some description) and just keeping a £5k emergency fund in savings. If it's not going to be for anything in particular then why have it sitting there doing bugger all and generating next to no interest?
In summary, does this sound vaguely sensible?
Obviously this varies massively from person to person but I am curious as to how much is 'enough', more so if you're not actually saving towards anything in particular.
I've had just shy of £10k in savings for a while now, just sitting there in an ISA. It's gone down to that in the past couple of years from a few grand higher, mainly because of loss of shift money meaning having to dip into savings to run a 745i/Boxster and also selling both of these for a fair loss in a short space of time after buying.
Now my salary has had a big increase in the last 6 months so I'm much more comfortable. The thing is, I don't have a purpose for this 10 grand as such, I've just always had in my head to have a nice 5 figure sum sitting in the bank as a rainy day fund. Interest of ~£140 over the past year has just been added so it's not like it's gaining anything of note..
Because, as we all know, the correct number of cars to have is X+1, I can't shake the idea of getting a third car (sports car of some description) and just keeping a £5k emergency fund in savings. If it's not going to be for anything in particular then why have it sitting there doing bugger all and generating next to no interest?
In summary, does this sound vaguely sensible?
- Aim to keep a ~£5k emergency fund for any typical worst case scenarios.
- Possibly buy a third car- knowing I'd now be comfortable enough running all these without requiring savings being used as before.
- Actually save for a purpose/something I want e.g. holidays etc. or, failing that, start overpaying the mortgage instead while interest rates are where they are for savings/mortgages.
12 months sensible living expenses. Not necessarily the same as Trailhead suggested, but I'm guessing similar.
Without an idea of current outgoings, assets that could be sold/leveraged, job stability and future employment prospects it's difficult to say.
I'm generally risk averse (despite 20 years of TVR ownership!) and therefore have sufficient savings/investments to keep me going for many years. I know others my age (mid 40's) with less than 6 months savings. They do have lovely (leased) cars though.
Without an idea of current outgoings, assets that could be sold/leveraged, job stability and future employment prospects it's difficult to say.
I'm generally risk averse (despite 20 years of TVR ownership!) and therefore have sufficient savings/investments to keep me going for many years. I know others my age (mid 40's) with less than 6 months savings. They do have lovely (leased) cars though.
Henners said:
We have c12mths of outgoings, deffo not net income - I’m hoping the 2 numbers are different for you 
Quite. 
In which case I have around 9 months worth of outgoings saved.
What about mortgage overpayments? Where's the balance to have between adding to that savings pot with negligible interest vs. taking a chunk out of the mortgage while savings rates are so poor?
Well if you are paying 3% on your mortage and can only get 1.5% in interest, then overpay the mortgage. Check with your lender most will just credit the overpayments so in future if you need a payment break its just a phonecall away. That way you are saving interest but could still get the overpayment back if you came out of work etc
Yes I meant more along the lines of when it would be best to start overpaying rather than continuing to save e.g. you wouldn't want to be overpaying the mortgage if you had zero savings.
Done a bit of browsing and Martin Lewis on MSE seems to suggest having 3-6 months worth of expenditure saved. Far more doable for me than trying to have a year's net salary in the bank!
Done a bit of browsing and Martin Lewis on MSE seems to suggest having 3-6 months worth of expenditure saved. Far more doable for me than trying to have a year's net salary in the bank!
If you’re thinking of an out of work scenario I suppose it depends on what you do and how employable you are.
For example finance in London vs finance in Edinburgh, are you a one trick pony in the only company in the town etc
Do you see yourself getting a similar paying job in 6mths? Then why have more than say 9mths cash easily accessible. Blah Blah.
For example finance in London vs finance in Edinburgh, are you a one trick pony in the only company in the town etc
Do you see yourself getting a similar paying job in 6mths? Then why have more than say 9mths cash easily accessible. Blah Blah.
I have about 2x my gross salary and still don't feel safe.
But I'm freelance and constantly face the possibility of work completely drying up.
Nothing regular and can get periods of no money coming in for 2 months but then suddenly work solidly for weeks in a row with no days off.
Feast then famine.
I learned my lesson from having a bad motorcycle crash in 2003 then a heart attack in 2009.
But I'm freelance and constantly face the possibility of work completely drying up.
Nothing regular and can get periods of no money coming in for 2 months but then suddenly work solidly for weeks in a row with no days off.
Feast then famine.
I learned my lesson from having a bad motorcycle crash in 2003 then a heart attack in 2009.
Patrick Bateman said:
Yes I meant more along the lines of when it would be best to start overpaying rather than continuing to save e.g. you wouldn't want to be overpaying the mortgage if you had zero savings.
Done a bit of browsing and Martin Lewis on MSE seems to suggest having 3-6 months worth of expenditure saved. Far more doable for me than trying to have a year's net salary in the bank!
I think bogie was suggesting, if you contact your mortgage company, you can likely overpay your mortgage, and still retain the option of drawing the overpaid money back down if you need it for an emergency.Done a bit of browsing and Martin Lewis on MSE seems to suggest having 3-6 months worth of expenditure saved. Far more doable for me than trying to have a year's net salary in the bank!
That's the approach I took and it worked well when I was around your age. I concentrated on overpaying rather than saving, in the knowledge that the overpayments could be retrieved back if needed.
And in fact, a few years ago, a mini emergency did arise. My business needed a fairly urgent, large cash injection. So I phoned the mortgage company and had the overpaid money returned to me within about 3-4 days. Then I just returned the money when things had settled down.
In fact, I still keep my mortgage open with a small balance and keep extending the term every so often (for a small admin fee). That way, if I ever need it, I can get access to a large amount of cash, quickly, without needing to go through any new approval process.
Whilst not wanting to put you off a third car purchase 
remember that this also creates a third set of insurance, tax, MOT, servicing and consumables expenses. You don't need telling that on top of this a five grand sports car could end up being a money pit.
Equally, the money is not sitting there doing nothing, it is providing you with peace of mind should the unexpected happen.
I agree with others that if you can offset this against your mortgage whilst retaining access if necessary then this is a no-brainer.
I also assume you have ISA/SIPP/Pension retirement provision.
A stocks & shares ISA might also be something to consider.
To answer your question 6 to 12 months income/overheads is a rule of thumb - and you sit exactly there right now. Everyone if different on this though, but I would stay as you are, personally.
remember that this also creates a third set of insurance, tax, MOT, servicing and consumables expenses. You don't need telling that on top of this a five grand sports car could end up being a money pit.Equally, the money is not sitting there doing nothing, it is providing you with peace of mind should the unexpected happen.
I agree with others that if you can offset this against your mortgage whilst retaining access if necessary then this is a no-brainer.
I also assume you have ISA/SIPP/Pension retirement provision.
A stocks & shares ISA might also be something to consider.
To answer your question 6 to 12 months income/overheads is a rule of thumb - and you sit exactly there right now. Everyone if different on this though, but I would stay as you are, personally.
I know that on Pistonheads we’re all powerfully-built company Directors, and that surveys have their limitations, but I found the FCA’s ‘Financial Lives Survey 2017’ report pretty interesting (and scary).
On average, across all adults in the UK, when both cash savings and investments held were pooled, 12% had none whatsoever, and 49% less than £10,000. 45% had access to under £2,000 of ready cash, and 13% none at all.
Bear in mind though that it also reported UK adults held £3,320 in unsecured debt (which excludes mortgage debt & student loans) - but that included those with no debt at all too, so the average debt held was in fact £9,570 - and those savings & investments stats look a little wobblier again.
I wouldn’t necessarily draw-up my financial plans based upon comparison with the least fortunate (or most feckless), but 12 months’ wages in the bank, net or otherwise, is a dream for most.
Personally, I’m of the opinion that if you’re fortunate enough to hold some solid cash etc. savings, or readily-accessible home equity, it provides a peace of mind that is not to be underestimated.
I do hold some cash tied-up in toys – watches being my poison – but mostly ones which I purchased with a favourable re-sale value and with small ongoing cost of ownership.
As the OP is 30 years of age, 7 years into a mortgage, and in a good financial position, I think at that age I’d probably be inclined towards a little fun & abandon with the cash (presuming no kids etc.), whilst still enjoying a decent rainy day fund.
On average, across all adults in the UK, when both cash savings and investments held were pooled, 12% had none whatsoever, and 49% less than £10,000. 45% had access to under £2,000 of ready cash, and 13% none at all.
Bear in mind though that it also reported UK adults held £3,320 in unsecured debt (which excludes mortgage debt & student loans) - but that included those with no debt at all too, so the average debt held was in fact £9,570 - and those savings & investments stats look a little wobblier again.
I wouldn’t necessarily draw-up my financial plans based upon comparison with the least fortunate (or most feckless), but 12 months’ wages in the bank, net or otherwise, is a dream for most.
Personally, I’m of the opinion that if you’re fortunate enough to hold some solid cash etc. savings, or readily-accessible home equity, it provides a peace of mind that is not to be underestimated.
I do hold some cash tied-up in toys – watches being my poison – but mostly ones which I purchased with a favourable re-sale value and with small ongoing cost of ownership.
As the OP is 30 years of age, 7 years into a mortgage, and in a good financial position, I think at that age I’d probably be inclined towards a little fun & abandon with the cash (presuming no kids etc.), whilst still enjoying a decent rainy day fund.
30, one good income and one below average.
We have 1 month outgoings saved, plus our normal savings, then I have another 1-2 months just in case.
I’m in really secure job, just bought a long term family home, got one nice car and will upgrade another this year, good pension in the background.
Life is for living, don’t let it pass you by whilst saving everything for a rainy day, there is a balance, like with all things.
We have 1 month outgoings saved, plus our normal savings, then I have another 1-2 months just in case.
I’m in really secure job, just bought a long term family home, got one nice car and will upgrade another this year, good pension in the background.
Life is for living, don’t let it pass you by whilst saving everything for a rainy day, there is a balance, like with all things.
I'll be a long time dead before I have 12 months salary in savings 
I generally try to keep £1-2k in easy access everyday savings, and have another couple of grand in a HTB ISA which I try not to touch.
It's such a personal thing though, I guess it depends on how exposed to risk you are. I rent so don't have to worry about house stuff, just unexpected car repairs really.
I generally try to keep £1-2k in easy access everyday savings, and have another couple of grand in a HTB ISA which I try not to touch.
It's such a personal thing though, I guess it depends on how exposed to risk you are. I rent so don't have to worry about house stuff, just unexpected car repairs really.
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