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How much ready cash is a reasonable 'buffer'

I've seen a few comments on here recently - that I agree with - saying that people should have a cash buffer readily available to see them through a rainy day. What do people think a good size is for that buffer be?


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According to my parental units (who may have a vested interest in the matter?!)*, it is three months' living expenses. But I would wager most people don't have that in ready funds. Interested in reading what others think. * I should clarify: I don't think the lovebunnies Sr. are out to do away with me and keep the chedda; rather, I think they'd like to know the snipping of the apron strings will not be undone by any unexpected deluge.

I try to keep 3 months worth of living expenses in instant access accounts. This works out as a grand buffer in each of my two current accounts and the rest in the savings accounts linked to these current accounts. I then try and save in a completly seperate account and pretend the buffer does not exist so I don't spend it.

Agree with your parental units lovebunny, 3 months salary is what I have heard recommended. I also read somewhere that a good way of saving is to put away 10% of your salary each month.

3 months in Instant Access is a bare minimum. Preferable there should be another 3 months on 90-day notice. Lovebunny, I presume they are just wanting to make sure that you don't move back in! Mike

I reckon you need to consider your circumstances, depends what it is for. A nice buffer could refer to having some time-ff the rat race, in which case a massive pot of savings would go down well :-) Or it could be planning for an eventuality where you may want to move home quickly or be flexible with areas you could work...(again, the more the better.) But strictly for an emergenc, like losing your job, the three months salary theory sounds very sound to me and I reckon is something we should all aim for. lovemoney.com member of staff ( but I caveat that with a note that I work on developing the website and am no expert :-) )

Thanks all! Looks like we have a split - 3 month's salary or 3 month's living expenses!? I always think of this cash as being there to help soften the blow of any of life's unexpected surprises - needing a new boiler on the coldest day in living memory, emergency dental repairs, etc, so never really sure what sort of money is needed. I suppose it is really useful when you need to finance something big and scary that could become an albatross for the rest of your life if you had to put it all on credit. It is also why I keep a couple of empty 0% purchase / low life APR credit cards around - just in case the manure really collides with the rotary cooling widget and I don't have the savings available to pay for the cleanup operation in full. I guess I will just carry on saving until I simply have too much cash and need to do something more useful with it. For now I have an offset mortgage, and until I have at the same amount of cash stored as the outstanding loan balance, I'm not really saving anyway, just reducing my net debt, whilst having the cash on hand (assuming the bank stays afloat). After that, I'll make sure I have my 3 months!

I think any savings pot based solely on living expenses will result in under provision. Fact is any 'rainy day' scenario will require you to pay for additional things [i]on top [/i]of your everyday living expenses. For example, if you think it will take 3 months to find another job if you lose your current one, and all you have are 3 months living expenses and nothing more, naturally you won't have enough money to fund your job search (That's right, finding a new job costs money!). IMHO any cash emergency fund should be based on gross salary to be on the cautious side: 3 months being a minimum, 6-12 months being the aim depending on your circumstances.

I use 24x mortgage interest as a rule of thumb. The idea is I can live for a year with my mortgage 50% of my total outgoings.

3 months living expenses does seem over cautious. If you lost your job for example, that would mean you would have your (1 month) notice period [b]plus[/b] 2months to find a new one (since when you find a job you will most likely have to wait a month before pay) [b]AND [/b]in the meantime you continue living your current employed lifestyle - that's crazy! Surely you would tighten your belt a whole lot in such a circumstance (and get a job faster than 3months!!)

LoveWheel The problem with redundancy in a recession is that no-one else is taking on more than the occasional replacement. Your timescale is over-optimistic in many parts of the country and in many industries. 6 months net pay (after tax, NI and the expenses of going to work) is more realistic in a recession. 3 months would be OK in a boom period. Mike