Please clarify '3-6 months expenses' emergency fund for me.

[Bluetoybox]

I know it's unique to everyone which is why it's so vague so obviously there is no right answer but I'm just wondering if you have an emergency fund that does cover 3-6 month expenses or you are aiming to build one, what does that actually entail for you? Are we talking 3, 4, 5 or 6 months worth of your actual take home household monthly income set aside, or have you cut it back to the bare bones, i.e. just enough to cover mortgage/rent and essential bills and a lower than normal food budget but you know you could still eat well enough on etc.? Do you include things that could be got rid of in an emergency like car payments if you have one? Are these factored in if you think in a true emergency you could sell the car or trade it in for a much cheaper version? Do you include childcare fees if you know a job loss emergency would mean you could take your child out of childcare anyway? Do you count optional recreation bills that again, could be stopped but maybe if they're for the kids you wouldn't want to have to stop them so they're budgeted in there?

I'm finally debt free (aside from mortgage) and am now building an emergency fun. I currently only have £2000 which isn't enough for anything but where my debt free goal was a very clear amount to save for, I'm now a bit confused at what I want to be aiming for so could just use some inspiration from what other wise Mumsnetters do please.

I have 4 months take home pay, I know I could stretch that to last longer and that in all likelihood if I were to end up needing it, it would be due to a redundancy situation in which case as it stands I would come out with a decent package to add to that which I could stretch out to last about a year.

Initially I’d work out what you actually need to live on each month. So if you earned £1000 and always saved £400, then you’re living on £600 each month. So first I’d aim for 3x this figure, then 6x this figure. Once you’ve reached that goal you can always start a new goal of saving for the fun/luxury extras.

@HalfShrunkMoreToGo Thank you. Yes, I work for the NHS so a job loss for me would almost certainly be due to redundancy which would result in a hefty lay out which is reassuring but my husband is self-employed so I do need to think hard about what we need as a minimum. Well done on such significant savings yourself. And yes, I also completely take your point that if I aim for a full month's income that can be stretched in an emergency.

@Myneighboursnorlax Thank you. I suppose the thing is I have so many other things I would like to save for too like things for the house and holidays when they're allowed; nothing extravagant but still; they need saving for but I want to have an emergency fund sat there first and then start to save for the luxuries I want to enjoy day to day. Maybe though that's my answer then... Build a bare bones emergency fund and then I can focus on my kitchen fund all the sooner.

I have the equivalent of 3 months take home pay saved as my emergency fund, knowing that this can stretch further as normally a chunk would be going into savings and some non-essentials. I also have the flexibility in my mortgage to draw down my overpayment reserve and underpay, should that be needed. As others have said, I should also be in receipt of a redundancy package, which makes me feel comfortable that I have enough of a reserve.

Six months' worth of mortgage, bills and food shopping, but nothing for, e.g. days out and presents (because I wouldn't be doing this stuff anyway if out of work). DH has recently persuaded me to reduce this a bit to pay off our mortgage as we hope to be mortgage-free by the end of this year, so my "six months' worth" doesn't need to be as high any more. I'm a contractor, so no redundancy money.

I am finishing paying off my debt next month and I will start my emergency fund. I calculated rent, bills (phones, internet, gas, insurance) food. I will do 3 months instead of 6 because I want to start saving for a downpayment after that.

I would go for 6 months of your household expenses, rather than take home pay - I am self employed so I have aimed for 12 months worth, I also have income protection insurance to cover me in case of illness - does self employed partner have this?

Well done OP on payoff your debt. I'm almost in the same position
I'm going to have a first target of three months bare bones expenses. After that I'll reassess and hopefully build it up further, perhaps to 3 months living normally levels, then 4 etc. I work well on smaller, achievable targets.
Where are you planning on keeping your emergency fund? I haven't had savings in so long so this is the part that is concerning me.

@al88
Thank you. Good luck in your final stretch! That's a good idea, if I start with the same aim I can build it from there but at least I'll have something.
At the moment I am just keeping it in an instant access ISA as I feel the point of emergency savings is to just have them available at the drop of a hat if need be.

@TinkysWinky thank you. No, my husband doesn't have that as it was very expensive and the only way they would give it to him was to have it delayed by 3 months which we felt defeated the point really. Also, I earn more than him so as long as I can keep working, in the worst case that my husband had to stop working completely, my income would cover all our bills minus childcare so it makes more sense to just have an emergency fund for us so hopefully any temporary glitches for him would mean we could not disrupt our little one's nursery routine.

We have earmarked a portion of our Premium Bond savings as essential.

Keeping 'em in Premium Bonds, while interest rates are so generally low means we could strike lucky.

4-6 months take home pay that was always my alternative to paying out for income protection insurance. My experience is it very rarely pays out.

I’m aiming for 6 months bare bones (mortgage and bills). I don’t have a car payment but I think I probably would include this as being without a car could slow down your ability to find a job.

I don’t have children either but I’ve planned to add enough for a months’ worth of childcare at first - that’s enough time get a fuller understanding of what situation I’m in and whether it is worth pulling baby out of childcare longer term.

I’ve got it all saved in premium bonds for now. If interest rates ever rise above pitiful I’ll look at moving them to whatever cash ISA or cash savings account pays more.

I saved manically for a 3 months fund and then relaxed a bit and am now adding to it at a slower rate which is allowing me to save for other goals as well.

Needing to suddenly sell your car isn’t a good idea because you will lose money on the deal, so don’t count that as a frivolous expense.

I don’t worry about restaurants, clothing, hobby supplies, entertainment , etc being part of the emergency budget. Basically anything that goes in discretionary spending.

I keep my cleaner and gardener budgeted because I have physical limitations that make them invaluable, but if things looked tight I could always cut them too.

I count it as 6 months pre-tax pay. That is the emergency fund.

Then if the shit hit the fan I would strip everything back to bare bones.

Interesting that people have an actual very specific figure for their living costs in mind.

I remember speaking to a mortgage advisor nearly 20 years ago and him asking what I’d feel comfortable with in savings. I said £5k minimum and he said most people have nowhere near that.

Twenty years on and I’m fortunate to be in a good financial position and wouldn’t feel happy with less than £10k or ideally £20k. But it is different from someone in their 20s to 40s or 50s.

The mindset about this is so important. The fact you want to save and have an emergency back up fund, that you won’t be using for other things is so important. Personally, I don’t see any savings beyond that as fair game for treats and holidays. Some of it is, certainly, but building bigger pots which can go into pensions or paying down mortgage or just building investments is good too. Too many people take the view that everything should be spent if it’s not vitally necessary - better to include emergency savings in vitally necessary than to just live purely hand to mouth each month - but a mindset of thinking about what you need first and then what you’d like and feels reasonable in a context of some thought through wider financial goals seems a better approach. That means, if after day to day bills and pensions and mortgage, regular savings etc, I find there’s £300 left at the end of the month, I don’t automatically think ‘treat time, what shall I have’ but automatically put it into savings. The fact I have those savings means when something occurs to me that I’d really like I usually can have it.....but it’s not money burning a hole in my pocket to be spent. A lot of people feel the need to spend everything spare, which isn’t a mindset to build further financial security.

I have an offset mortgage so that I can keep a significant “emergency” fund readily available, but without feeling like the money is doing nothing for me. As a result, I have well over 6 months take home there. When I first started to build it, I did so with a target based on full take home not bare bones, because that made me feel more comfortable. And 6 months full pay might be 9 months bare bones, so that again made me more comfortable.