Savings...

[MimblesDaughter]

WWYD

We have some savings - not loads, but enough that we could pay the mortgage & bills for about a year if disaster struck.

For context, I'm self-employed (in second year of business so not hugely secure though I do make a profit) and DH is employed on a contract basis currently, so neither of us have that much security.

We still have a mortgage, and we could use some of our savings to pay a chunk off it. We could also save for a loft extension.

My question is - how much do you think is sensible to have in savings? 3 months? 6 months? A year?

I have 12 months of expenditure as an emergency fund, good thing too as I'm just being made redundant again (previously it took 5 months to find work).

So given your family situation, I don't see anything wrong with having a year of expenses as an emergency fund. It is higher than you will hear on financial podcasts like Meaningfull Money or The Dave Ramsey Show buy it's you decision how much to have in your emergency fund.

1. All debts other than mortgage paid off.
2. Your emergency fund.
3. Pension / Retirement provision (Stocks & Shares ISA, SIPP etc). At least 15% of income going to retirement.
4. Then chip away at the mortgage.

4.

@nannynick thanks for replying - good to know we're not being over cautious by sitting on the money!

I'm inclined to agree that 12 months sounds a sensible buffer to have in your position. What I would do though, is investigate the best places to put those savings. You shouldn't need all of it in "instant access" type accounts, if it is going to be needed then you could have some of it in 6 and 9 month notice accounts, if that got you a better interest rate, or put some of it in fixed term deposits.

I think a year is a little cautious but not necessarily over the top.
Our own disaster plan is around six months with three months available instantly and the rest could be accessed in three months if needed.
I'd like to think if disaster happened it could be rectified or go some way towards rectifying it within six months then cutting our cloth accordingly moving forwards after that.

Well, savings or saving for an extension - same difference really. Our rainy day money or any other savings are all in one pot (range of funds under the ISA umbrella). That money could be aceessed within 48-72h if needed. Other than that, we keep a few grand in a high interest current account (3% I think) just in case but we’ve never had to use it.

Dave Ramsey recommends six months of living costs but imo I think a year is more sensible.

As much as you can whilst still having a decent quality of life .