Emergency savings

[jansman]

Here is but one reason for an emergency stash. Where I am working at the moment we get paid cash ,weekly.On Friday the boss had family problems and did not show.On Saturday, still no show. And NO WAGES!

He took the trouble to ring us all Saturday night, ( his Mum died)and money will be in our hands 7am Wednesday when we start back.Most of the lads were OK about it, but one young chap with a new baby is on the bare bones of his arse ( been there,done that) and is going week to week.He was desperate as he had paid all his bills and relying on payday to get the groceries, and importantly nappies and such for baby. I bunged him a hundred quid and told him to pay me back £25 a week. I also gently told him to try and get in front with food shopping and try and get a bit of a stock together.

[pseudonym]

Here is but one reason for an emergency stash. Where I am working at the moment we get paid cash ,weekly.On Friday the boss had family problems and did not show.On Saturday, still no show. And NO WAGES!

He took the trouble to ring us all Saturday night, ( his Mum died)and money will be in our hands 7am Wednesday when we start back.Most of the lads were OK about it, but one young chap with a new baby is on the bare bones of his arse ( been there,done that) and is going week to week.He was desperate as he had paid all his bills and relying on payday to get the groceries, and importantly nappies and such for baby. I bunged him a hundred quid and told him to pay me back £25 a week. I also gently told him to try and get in front with food shopping and try and get a bit of a stock together.

Nicely done Sir, hopefully he'll take your advice to heart.

[Arzosah]

Oh my word ... I hope I never end up as squeaky as that ... I remember it, mind you!

I'm glad the boss managed to ring everyone even in the midst of such a close bereavement. And that the cash flow wasn't critical at all for you, jansman.

[Bad Wombat]

I've always though a sensible minimum cash reserve is whatever I need for 6 months without work. I've rarely, if ever, gone below £10k. I know it can be controversial, but I think that having a decent amount of savings is the most basic of preps.

[jansman]

Oh my word ... I hope I never end up as squeaky as that ... I remember it, mind you!

I'm glad the boss managed to ring everyone even in the midst of such a close bereavement. And that the cash flow wasn't critical at all for you, jansman.

To be fair to the boss, he takes payday seriously. As for the young fella, I have been in his shoes. At my time of life, cash flow should not be an issue. Frankly , I deserve a kick up the ar@e if I was in that place again. However, it proves the point of the original link.

[Deeps]

Oh my word ... I hope I never end up as squeaky as that ... I remember it, mind you!

I'm glad the boss managed to ring everyone even in the midst of such a close bereavement. And that the cash flow wasn't critical at all for you, jansman.

To be fair to the boss, he takes payday seriously. As for the young fella, I have been in his shoes. At my time of life, cash flow should not be an issue. Frankly , I deserve a kick up the ar@e if I was in that place again. However, it proves the point of the original link.

Good for you for helping him out, I think a lot of us have been that skint at different times of our lives, some are lucky to have family or friends to fall back on so get by but others don't have the support and go into a bit of a downward spiral. I'm grateful to my folks for helping me with my rent one month 20 odd years ago and for always being there for the wee bumps. I've helped out a few mates with a roof and/or money over the years, mostly appreciated and all money paid back but not always, I'd still do it again if it was needed and touch wood I'll never be in the position to need that help now myself. I think being on the bones of my arse in the past has made me want to be financially secure as well as the food and stuff that a lot of us take as a given. I think its easy as you get older and more financially comfortable, even for non preppers, to forget how quickly you go through cash when you're young, maybe that was just me though.

[sethorly]

This is an area I have expertise in. The "standard" amount of emergency cash is 3 times your net monthly income, but you can get away with 3 times your monthly outgoings to start with. So for instance, if you bring in £1,500 after taxes every month and of that spend £1,000 on necessary outgoings, your first goal should be £3,000 in cash, with your second goal being £4,500. For extra comfort go for 3 times the gross monthly amount.

Except for expensive non-essential debt (which usually should be removed first), this emergency cash ought to be a very high financial priority. I've lost count of the number of times having this cash cushion has shielded the clients I have looked after from ruin. Of all your preps, this is one where the PROBABILITY and IMPACT of needing the cash in an emergency are both HIGH during your lifetime.

You may agree with me that having this cash somewhere instantly and easily accessible is of more importance than chasing the best rates, in which case you may wish to place this cash in a dedicated joint account with your partner, or in a dedicated savings account, or in a cash-ISA, with the same provider as your current account, so money can be transferred instantly to your current account if needed.

Everyone's situation is different and there is no one-fit solution, but I haven't come across anyone who wouldn't benefit from some variant of this basic prep. The exception is where you need to almost-bankrupt yourself to get a foot on the housing ladder

It's worth touching on the psychological/happiness outcome of having an emergency fund like this too: you are likely to feel wealthy regardless of income, you feel more relaxed, you have fewer financial arguments with your spouse. Basically, the more cash you have the more options you have.

If you're able to, you could have a larger cash cushion (like the poster above I have one year's worth of outgoings), but whether that is a good idea depends on your individual circumstances - for instance it may be better to pay off debt.

[Mad Scientist]

Well said you guys! I always remember a young woman and her chap I worked with who ( I thought) spent too much money on holidays and a too- big house for themselves and bragged about it. Then her chap got demoted in a workplace that's been unstable for years. I know it's lovely to have a blast now and again but there really is no substitute for security. I saved up several thousand over the years and hubby is in a good job at last so when my job ended I just went home to my ever-frugal lifestyle without batting an eyelid. I always vowed I would be never be imprisoned by other people's crap.

[grenfell]

This is an area I have expertise in. The "standard" amount of emergency cash is 3 times your net monthly income, but you can get away with 3 times your monthly outgoings to start with. So for instance, if you bring in £1,500 after taxes every month and of that spend £1,000 on necessary outgoings, your first goal should be £3,000 in cash, with your second goal being £4,500. For extra comfort go for 3 times the gross monthly amount.

You may agree with me that having this cash somewhere instantly and easily accessible is of more importance than chasing the best rates, in which case you may wish to place this cash in a dedicated joint account with your partner, or in a dedicated savings account, or in a cash-ISA,.

Interesting thread to reread . I wouldn't disagree with what sethorly has written one bit. I will ask one question for clarity more than anything else.
When we talk here of emergency cash and having 3 months salary can we be a little clearer as to what form that takes? Do people on here keep all that in a instance access account or all in a carrier bag under the bed or do people suggest perhaps a months worth in physical cash with the rest in the bank. Not critising anyone's methods , just asking to see how others approach this. For what it's worth I keep a few thousand in physical cash and have a few years worth in various accounts.

[diamond lil]

I don't keep anything in the bank, I take it out the day it's paid in and keep it in cash. I haven't got anything like a year's outgoings, but I haven't got any cards or any debt either. And I've been so skint in the distant past that we had nothing in the house to eat but real absolute basics - egg & chips for tea with a jam sammich for afters. Which is totally fine if you're hungry I think it's one thing being short of money - but it's another thing entirely being up to the eyeballs in debt and credit cards. I couldn't live with that personally.