Given current inflation, should part-emergency fund also be 'invested' or should it all stay in cash?

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Windsor23

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In the middle of a financial overhaul and have decided to retain 50k as my emergency fund. I also have 20k in Nvidia shares (via Revolut app) and three other zero balance credit cards with 10k/12k limits so I would not to be stuck to get a hold of immediate liquidity if all came to all. But the 50k could be easily eaten away in today's inflationary environment so should I also invest this somewhere, other than a useless deposit account with little to no interest (wish Simon could get his skates on with this new ISA thing)?
 
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Windsor23 said:
But the 50k could be easily eaten away in today's inflationary environment so should I also invest this somewhere, other than a useless deposit account with little to no interest
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Inflation is c. 2.7%. So deposit returns of c. 3.6% gross (before DIRT) are required to keep pace with that. I don't think that there's anything on offer right now that gives that. But I'm not sure what it's completely fair to characterise all deposit rates on offer right now as "useless".

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Windsor23 said:
so should I also invest this somewhere
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Depends on your overall personal/financial circumstances which we know nothing about.
 
ClubMan said:
Depends on your overall personal/financial circumstances which we know nothing about.
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I've already invested elsewhere - this relates purely to my emergency fund and whether it should be part-invested to protect purchasing power. Supposed 2.7% inflation rate given the soaring prices of everything IRL sounds positively quaint. :)
 
Windsor23 said:
Supposed 2.7% inflation rate given the soaring prices of everything IRL sounds positively quaint.
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That's the latest CSO CPI figure.
Windsor23 said:
I've already invested elsewhere
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Yes, but a lot depends on where/in what. E.g. if it's in some high risk/volatility/reward asset class for the long term then what you might want to do with your "emergency" fund may be different if your other savings/investments are in something more cautious and/or shorter term.

If you don't want to give more details then that's your prerogative but it may limit the usefulness of any feedback that others post back.
 
Existing investments: 200k ETFs intending to stay over 15 years, pension fully funded to allowable limits, 27% LTV mortgage, loan repayments easily covered by 110k p.a income, no consumer debt, 20k Nvidia shares and 50k gold.

Emergency fund ( 50k sitting in current account) is the bit I'm looking for advice on re inflationary pressures, since everything else is pretty much covered.
 
In that context keeping at least some of the €50K on deposit doesn't seem like the worst option in the world even if inflation may erode it slightly. Maybe some on demand and some in a term account at a higher rate. See the best buys linked earlier.
 
What circumstances do you foresee here that require a rainy-day fund of that size held in cash? Your ability to cover a rainy-day event through either debt or liquidating a proportion of your investments would indicate that a cash buffer of that size is possibly overkill imo.
 
Windsor23 said:
10 to 12 months living expenses
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Would you realistically be likely to end up in a situation where you need a full year's expenses to hand without the ability to get alternative employment if necessary, to be able to use credit lines if necessary, to liquidate other assets to give you cash, etc.? Do you actually spend €50K p.a.?
Windsor23 said:
which I thought was standard enough
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Not sure where you got that idea?
 
Imagine a severe economic depression results in you losing your job and your stock portfolio losing 90% of its value.

IMO an emergency fund should always be kept on deposit.
 
Windsor23 said:
10 to 12 months living expenses, which I thought was standard enough.
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Might be standard for someone breaking out of bad money habits, but not necessary for your situation would be my opinion. 3 months would be plenty I’d say, then invest the rest. It’s far more likely to be unused as a rainy day fund (and therefore to compound) than to be needed.
 
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