SAYE as rainy day funds?
Discussion
Hey All,
So I think the answer to this is "yes" but I await the wisdom of the crowds.
Like everyone, I am saving all the cash I can because we have Covid and soon Brexit and this is just the beginning. At the moment I am just piling it up in a so called savings account that gives me ~1% APR.
The company I work for has opened its SAYE scheme for this year. I already put a few hundred a month into it, having got back 2 - 3 times my investment every three years or so.
Rather than have cash in the bank, I am thinking of putting some (Less than a third) of what I am saving every month into the SAYE. I already have > 4 -6 months in the savings account as cash.
I assume it is standard but if the share price really bombs we can just opt to take the cash at the end of the term. As to the risk of the company "going anywhere" - extremely unlikely.
Are there any reasons NOT to do it or is it a sound move, as I think it is. I think there may be penalties (forgoing the option to buy) for withdrawing from the scheme early but this is the whole purpose of emergency funds, emergencies.
Please tell me I am right
So I think the answer to this is "yes" but I await the wisdom of the crowds.
Like everyone, I am saving all the cash I can because we have Covid and soon Brexit and this is just the beginning. At the moment I am just piling it up in a so called savings account that gives me ~1% APR.
The company I work for has opened its SAYE scheme for this year. I already put a few hundred a month into it, having got back 2 - 3 times my investment every three years or so.
Rather than have cash in the bank, I am thinking of putting some (Less than a third) of what I am saving every month into the SAYE. I already have > 4 -6 months in the savings account as cash.
I assume it is standard but if the share price really bombs we can just opt to take the cash at the end of the term. As to the risk of the company "going anywhere" - extremely unlikely.
Are there any reasons NOT to do it or is it a sound move, as I think it is. I think there may be penalties (forgoing the option to buy) for withdrawing from the scheme early but this is the whole purpose of emergency funds, emergencies.
Please tell me I am right
Simpo Two said:
ChocyLint1 said:
I already put a few hundred a month into it, having got back 2 - 3 times my investment every three years or so.
Goes up by 200-300% every three years? I'll have some of that. What do they invest in?As a rainy day fund, I can’t see any real downside versus the alternative of a bog standard savings account.
In a scenario where you need to access the money, then you can remove 100% of the savings without too much hassle/delay before the 3 or 5 year savings term ends and be no worse off (aside from losing the bonus & investment opportunity). Yes, in theory you would have also lost the interest or investment return opportunity the money could have otherwise accrued had you plumped for an alternative to the abandoned SAYE, but if the only alternative under consideration is a low (or no...) interest savings account, then that’s not really a factor.
Presuming the provider is under the FSCS scheme (and you aren’t using the same provider elsewhere i.e. with all your eggs in the one basket), then the savings under SAYE benefit from the £75k protection too.
With much risk removed, there is the upside of 2-3x return on investment, plus it’s not a bad thing to have a rainy day fund that’s automatically taken from your pay packet each month before you can spend it, and then removed to savings you can’t readily dip into.
It’s a no-brainer, I think.
And yes, I use my SAYE too, but the returns, whilst good, aren’t as good as yours!
In a scenario where you need to access the money, then you can remove 100% of the savings without too much hassle/delay before the 3 or 5 year savings term ends and be no worse off (aside from losing the bonus & investment opportunity). Yes, in theory you would have also lost the interest or investment return opportunity the money could have otherwise accrued had you plumped for an alternative to the abandoned SAYE, but if the only alternative under consideration is a low (or no...) interest savings account, then that’s not really a factor.
Presuming the provider is under the FSCS scheme (and you aren’t using the same provider elsewhere i.e. with all your eggs in the one basket), then the savings under SAYE benefit from the £75k protection too.
With much risk removed, there is the upside of 2-3x return on investment, plus it’s not a bad thing to have a rainy day fund that’s automatically taken from your pay packet each month before you can spend it, and then removed to savings you can’t readily dip into.
It’s a no-brainer, I think.
And yes, I use my SAYE too, but the returns, whilst good, aren’t as good as yours!
Edited by UnclePat on Friday 11th September 20:55
rockin said:
Simpo Two said:
but what about the self-employed?
Business Asset Disposal Relief.They get a nice low 10% CGT rate on up to £1million of gains when they sell their businesses. For a higher rate tax payer that can be a handy tax saving of £100,000
Gassing Station | Finance | Top of Page | What's New | My Stuff