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Emergency fund - how much?

(16 Posts)
Karakandchipattis Sat 17-Mar-18 04:30:04

We don't live in the UK at the moment but I'm trying to work out how much we should be budgeting for our emergency fund. It stands at zero at the moment so this is a long term goal but I use YNAB and I find it more motivating to have a target in place even if it's going to take five (or ten!) years.

We've been out of the UK so long, I'm out of touch on how much life actually costs now. If we were to live as a family of two adults and two children (tweens/teenagers) outside London and the South East (probably somewhere like Leeds/Manchester), how much should I be allowing a month to live on including rent without worrying excessively about how we'll pay school uniform etc, needing to make the infamous Mumsnet chicken last all week? I'm not expecting a budget that allows us holidays or much fun but enough petrol money to occasionally go on a day out, not stressing about transport to job interviews etc.

Assume no eligibility for benefits at all.

I'm thinking 2k a month. Is that realistic? Too high? Too low? I'm conscious this is a above average income but I think on average income families would be eligible for some top up benefits and I'm assuming that the emergency fund itself would make us ineligible for most of those.

Thanks

JoJoSM2 Sat 17-Mar-18 08:38:20

Average after tax income for a family with 2 children is about 3500-3600 per month after council tax. 2k is more equivalent to both parents on the minimum wage and I'd expect they'd get some benefits.

Have a look at how much rent you'd pay by looking at Rightmove to establish what sort of property you'd be happy with. I'd expect you'd need to add 1k for necessities: bills (council tax, utilities, tv licence, phones), petrol/commuting, food and cleaning products.

And then you'd need money for things like haircuts, dentist, clothes, children's activities, school trips, pocket money etc.

Personally, I'd expect 2k per month would be very tight - watch every penny, few clothes from charity shops/Primark and cycling to work. Unless you can rent a very cheap place.

JoJoSM2 Sat 17-Mar-18 08:41:04

In terms of an emergency fund, the general guidance is 6 months worth of money. However, if you rent and don't have a car, you might not need that much as you want have to pay for any emergency repairs. But you'd need a few k in case of redundancy or illness.

Nix32 Sat 17-Mar-18 09:54:53

@JoJoSM2 - that's really not average take home pay, not for most of the country. We're a family of 4, living a comfortable lifestyle on a lot less than that.

Advice for emergency funds tends to be 6 months income.

JoJoSM2 Sat 17-Mar-18 12:03:55

Nix, these are official stats from the IFS. But of course the standard of living will vary greatly especially because housing or commuting costs range a lot.

You can always share your comfortable living budget here - I'd be interested to find out.

ReinettePompadour Sat 17-Mar-18 12:08:30

I would suggest a minimum of 6 months money. We have 12 month put to one side because I had surgery a few years back on a ligament and it took 10 months to get back to being independent and not needing help from my dh.

Karakandchipattis Sat 17-Mar-18 16:34:38

Thanks everyone. I'm working on 12 months but the question is 12 months of what. Income isn't elrrally relevant as I'm not preparing for a situation of staying where we are plus our expenses include big outgoings we wouldn't be paying in an emergency situation (eg international school fees).

It looks like 2k is too low though and we should be dining more like 3.5k.

Donotbequotingmeinbold Mon 19-Mar-18 19:24:31

2K a month take home is not minimum wage. It is more than 30K before deductions. Minimum wage for a 40 hour week is £16,286 before deductions which is almost half of what you would need to earn to take home 2K.

OP I think you would be comfortable on 1,500 to 1,750 a month plus whatever rent you would need in your area (so another £600 to £1000) if you are not budgeting for holidays as well.

MessySurfaces Mon 19-Mar-18 20:27:06

Minimum wage take home pay for one person working full time (37.5 hours) is approx 1150. So two adults working full time on minimum wage bring in about 2300 net (jojo is right).

The answer to the OP is going to be very much a piece of string- OP, your post prompted me to check, and for us the comfortable but not fancy answer is about 2400- we are in London, but have an un-naturally low mortgage and smaller children than you. (I've not included any childcare in that though.) we can and do manage on less, but it gets a bit scraping-by.

JoJoSM2 Mon 19-Mar-18 21:33:20

Things like international school fees are 25-35k a year per child in the south of England. In the north, they'll be less but if that's something you're thinking about, then with 2 children you might need up to 5k a month just to pay for schooling. If you're looking at emergency budget, I'd definitely factor in school fees - you're not going to pull children out of school overnight especially if they're teens and doing exams.

Private schools aren't sth that average families can afford and only about 6-7% of children are privately educated.

Obv you might give up holidays or upgrading a car but you'd need at least 2k/month just to keep a cheap roof over your head and food on the table. So that's 24k a year as long as you're not in a posh part of Manchester (where rents will probably be very high).

Karakandchipattis Wed 21-Mar-18 12:40:59

Thanks everyone. Its looking like 3k ish is more realistic.

No plans to include private school fees in this. This is an emergency fund and I'd wouldn't consider private fees an essential in the UK. Where we are at the moment they are essential because there's no state alternative.

That, with relocation costs, comes to about USD100k which is a pretty scary figure!

JoJoSM2 Wed 21-Mar-18 13:34:46

Loads of money! I hope the relocation in worth it.

Karakandchipattis Wed 21-Mar-18 15:21:43

We'll only be doing it this way if we have no choice (job loss/ war etc). Otherwise I'd expect us to have jobs lined up first.

JoJoSM2 Wed 21-Mar-18 17:18:34

If you were escaping war, then I'm sure you'd get by on £1500 in desperation- in a cheap 2-bed flat with no car. Don't know if you'd need a visa but if not then it doesn't take that long to find a job in the UK.

Karakandchipattis Thu 22-Mar-18 05:40:01

If I'm escaping war, how much money we have in an emergency fund isn't really an issue. I just want to ensure we start to build up some protection.

MessySurfaces Thu 22-Mar-18 13:50:59

Glad to hear that kara!!!!!

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