How much cash should you hold?
Everyone needs cash savings
Important - This guide contains helpful information about how much cash people should consider holding to help you make informed decisions. Active Savings and this guide are not personal advice based on your individual circumstances. Fixed rate products generally only let you access your savings when the term ends. Inflation reduces the future spending power of money. If you're not sure what's right for you, seek advice.
It’s important for all of us to have a safety net to fall back on when the unexpected happens.
But we’re all different. That means the exact amount of money you should keep tucked away will depend on your circumstances and your lifestyle.
Why should you hold cash?
One in two people had a surprise cost in the last year.
Cash savings are reliable, and boring. And serve two purposes:
Goals within the next five years
Use fixed terms. You’ll get a fixed rate for a set period so you’ll know exactly how much you’ll get back. But remember, you usually can’t withdraw until the term has ended.
If you have a goal in mind within the next five years, you can time your fixed term, so you get the money back when you need it.
Use easy access. They allow unlimited withdrawals, whenever you want. The trade off is you will usually get a lower rate on your cash than if you used a fixed term.
If an unexpected cost comes up, you’ll need money in easy access so you can get to it immediately.
The first thing you should do is build your emergency pot.
Unexpected costs are, well… unexpected. And they can put you in debt if you’re not prepared for them.
Therefore, you need to prepare - even if you have a steady income.
We surveyed 2,000 people from across the country in October 2023 to find out:
- How many have had an unexpected cost in the last year?
- How much did it cost?
- How did they pay for it?
The results reinforced the need for emergency savings.
Of the people surveyed:
- Over half had a surprise cost in the last 12 months
- Most had a cost between £500 - £1,000
- 1 in 5 had costs of more than £1,000
Fortunately, many people paid for these costs with savings.
But worryingly, many people put some of it on a credit card, borrowed from family and friends or dipped into their overdraft.
Your emergency fund is your priority.
Borrowing from family isn’t always an option, while falling into debt can mean racking up interest charges while you pay it back. There’s also the chance of another expense coming up before you’ve paid off the last – making problems worse.
You should build up your emergency fund as soon as possible.
The goal is to have enough savings to cover unexpected costs, even if they come in quick succession.
How much cash do people currently hold?
Build your emergency fund with Active Savings
One online account gives you access to a range of competitive savings rates from multiple banks and building societies.
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The Active Savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised and regulated by the Financial Conduct Authority (firm reference number 915119). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 with firm reference 901007 for the issuing of electronic money.
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