How much is sensible to have saved?

[Kaloobear]

We used all our savings in buying our house and are now faced with a mortgage of a horrible amount and a savings balance of £0, which is freaking me out slightly.

What's a sensible goal to have as an emergency fund? Would 3 months salary be about right? I think it will take us about 2 years to save that which is a tad scary :/ we have family abroad who we'd love to go and see next year but it would cost a good £2k. I don't know whether it's silly to even contemplate and we should just focus on the emergency pot first.

Six months is advised especially if you have kids.

Good grief! We do. I can see why really, it's just hard to imagine where it'll come from unless we do it very slowly.

6 sounds about right, but to be honest in your shoes OP, I'd start from the principle that anything is better than nothing & start saving. Only you will know how much you can afford to put back per month.

FWIW I don't have 6 months, probably more like 5 when compared to my actual monthly take home and DP about the same, but since a lot of our recent expenditure has been on our house, I know we can drop our expenditure dramatically in an emergency. (In other words, that 5 could actually support us for quite a bit longer, albeit with fewer luxuries).

(I also have things I could sell if it came to it, but would be taking steps to downsize before it ever reached that point.)

Regarding the holiday, I have no idea of you income, but I'd be thinking of how long that £2k would take to save. E.g. If you could do it in 3 months, it might be okay. If that's a year's savings, I wouldn't even contemplate it in your position. Could you come up with a savings plan / target and if you reach your goal make a decision on the holiday nearer the time? Also if you're at all like me, holidays have a tendency to go over budget

Just start saving. Put it out of sight and ignore it. Before you know it. you'll be close to your target.

I'd also add that if you're jetting off on hols only to fret about spending money the whole time you're there, you probably won't enjoy it. I was in a very expensive city a few years back when we were quite a bit poorer and tbh I found it all a bit stressful.

The holiday would be expensive for flights but we wouldn't have accommodation costs. We would need spending money of course though. The £2k would cover all of it but would take us a long time to save-8 months. The main worry is that I think I'd feel guilty spending what could be emergency pot money.

6 months salary is £12k, and we have about £250 a month available for saving at the moment. We could probably save more if we knuckled down to it, maybe as much as £500 a month, but we were hoping to overpay the mortgage at the same time as saving. It's hard to know which should be the priority-they both feel very important!

I know you are supposed to have about six months wages saved but I wonder how many people actually do in the real world .
That would mean that most of the coupled I know on mid ranking professions would have about 30 - 40k in savings .

We have about 4-5 months and I think that makes us quite unusual rather than the norm

We have none. Well, 24p actually. And a credit card. And an overdraft. Ho hum......

captainhastings I would agree, for our age, we are pretty unusual among our friends, most of whom are somewhere between 'coping' and 'skint'.

But I still think it's a good idea to put away a decent sum if you can. I definitely slept better through DP's redundancy knowing we had savings if we really needed them (fortunately didn't but it was a very close thing).

I think there's the ideal (say 6 months) but there will be another figure where an individual feels comfortable and that may change with time & circumstance. (Having seen bills rocket and gone through DP's redundancy plus 'interesting times' at my own work, my personal comfort figure has definitely increased!)

OP one thing I found useful was siphoning the money off to a savings account on the day my pay came in - that way you don't have time to miss it

I agree , I was just worried that the OP thought she was done kind of financial deviant for not having tens of thousands tucked away .

We also put money away by direct debit on payday.

I don't think you need six months salary but I do think you need to have an idea of what your basic costs are. If you went hyper frugal, you still have to spend some money while you're looking for the next job. How much would you need? Essential monthly outgoings? And it's worth having that amount in the bank. I've heard that it should be three months for most people and six months for self employeed people.

Why not split any money left over between a) emergency fund saving and b) saving for the holiday?

I think 6 months neccessary outgoings is probably more achievable. I'mm currently in debt due to not so DP but that's what i'll be striving towards.

nkf that sounds sensible but knowing me I think I need to see one pot rising-if it's spread out I'll feel like it's rising so slowly I might as well not bother. A bit silly I know!

Think I'm going to do a budget and see if we can have a really frugal couple of months (minus car insurance which is due next month unfortunately), see how much is NECESSARY for living, and go from there.

In fact I might try a no spend September...(not counting food and bills!)

Between three and six months is indeed a sensible emergency fund to have. In other words, if you don't have that, I would suggest not going on holiday until you are some way towards it.

However, the attitude to saving in the UK really does surprise me. In this country people live very frugally, totally within their means for the most part. Sure, a few get into debt but most are avid savers, which is one reason why the economy has been in the shit for so long, which only makes them more determined to save.

Perhaps I'm reading the thread wrong, but the impression I'm getting is that once you have this emergency fund, the feeling of some posters is that it isn't necessary to save any more.

Of course, if you don't have money to save, then you can't save, but do people really spend all their spare cash after reaching the sensible buffer amount?

But only after you have the emergency fund sorted, you should consider other investments like overpaying the mortgage, shares, pensions etc.

Do you have a mortgage where you can 'borrow back' if you overpay? We just overpay a couple of hundred on the mortgage each month and use it as a saving account, 'borrowed back' recently (no charge, money with us in a few days) to sort car. Might be worth looking into as if you don't need it then it reduces mortgage.

Annoyingly we don't-I wish we'd thought of that at the time! We were first time buyers and not very clever...